Debt Consolidation Options: Is One Right for You?
Debt consolidation is an effective solution for some individuals, but there are many pros and cons of each option to consider.
The general advantage of debt consolidation is that a consumer can combine debts into one payment, possibly helping to eliminate some of the stress involved in receiving and paying multiple bills.
Beyond that, following is a basic breakdown of three common debt consolidation options, along with the potential pros and cons of each.
Balance Transfer Card
- Potentially lower introductory interest
- More funds may be applied toward principal balance
- Possible lower number of credit card payments
- Potentially high interest rates after introductory period ends
- Potentially costly balance transfer and annual fees
- May lower credit score if balances are above 30 percent of credit limits
Unsecured Personal Loan
- Fixed interest rates in many cases
- Collateral generally not required
- Payments may be made installments
- May reflect positively on credit score by decreasing revolving credit limit used
- Possibly higher interest rates
- Repayment terms are generally shorter
- Loan origination and other fees may apply
Home Equity Loan
- Possibly lower interest rates
- Interest generally tax-deductible
- Repayment terms generally longer than unsecured loan options
- Collateral requirements
- Possible risk of home foreclosure if loan is not repaid accordingly
- Closing costs and other fees may apply
In order to review debt consolidation options, speak with a Georgia Heritage Federal Credit Union representative. If you’re considering a loan, let us help you complete the application. Contact us through our website, or visit one of our credit union branches.