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Debt Consolidation

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For many of us debt is a part of life. We take out loans to pay for the most important things in life: our homes, our cars, our education, our health. But sometimes, debt can feel overwhelming. If that's the case, it may be time to consider debt consolidation. 

Why Consolidate Debt

Consolidating debt can help you combine two or more of your existing debts into one, larger debit. For example, let's say you have credit card debt and auto loan debt. Rather than having two separate monthly payments -- on your student loans and on your auto loan -- you'll be making one payment that covers them both. 

Besides not having to deal with juggling multiple monthly payments, there are other benefits to debt consolidation as well. In many cases, you may be able to negotiate more favorable debt repayment terms, such as a lower interest rate, a lower monthly payment, or even both. 

How Debt Consolidation Works

When you consolidate debt, you're actually taking out a brand-new loan. This new loan encompasses the other debts you're consolidating; essentially it transfers your debts to a new lender.
Keep in mind that debt consolidation is not the same thing as debt settlement. With debt settlement, you’re reducing the actual amount of debt you owe. Debt consolidation, on the other hand, does not reduce your owed debts, but it reduces the number of creditors you owe. However, it can make life easier on you … and still end up saving you money.

Let’s say that your auto loan had a balance of $5,000 and an interest rate of 14%. Your credit card had a balance of $10,000 and a 28% APR.  With debt consolidation, you can apply for a new loan with a lower interest rate. Perhaps your new interest rate for the entire, $15,000 balance, is only 12%.

That interest rate can make a big difference when it comes to how much you’ll pay over the life of the loan. This is true even if you continue making the same monthly payment amount as you did before the consolidation. And now, you’ll only have one monthly payment to think about, instead of two. Check out our Debt Consolidation Financial Calculator to see for yourself. 

How to use an Academy Bank Personal Loan for Debt Consolidation

An Academy Bank personal loan, Express Loan, can provide you with the necessary funding to pay off multiple debts at one time so you will only have the one personal loan payment moving forward. Check the current interest rates on your debts and make sure they are higher than the proposed Personal Loan.  If the interest rate is lower you will save quite a bit of money over the duration of the personal loan and will only be making one payment a month instead of many. *Subject to credit approval.

How to use an Academy Bank HELOC for Debt Consolidation

A HELOC, Home Equity Line of Credit, allows you to borrow against the equity you’ve built in your home. Compare the potential interest savings and monthly payments between your current debts and the proposed HELOC. The amount of money you can save by combining debt into a HELOC depends on several factors. These include the interest rates of your current debts and the interest rate of the HELOC.

If your HELOC's interest rate is lower than your current debts, you could potentially reduce interest costs over the repayment period. However, it's essential to consider any fees associated with the HELOC and ensure that your repayment plan aligns with your financial goals.

Once approved for a HELOC, use the loan to pay off your existing high-interest debt and you'll have only one payment for the home equity loan. *Subject to credit approval.

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