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5 Benefits to Consolidating Holiday Debt

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Whether your kids just had to have the hottest Christmas toy this year or some unexpected expenses came out of nowhere, the bills start rolling in and the holiday cheer may be fading. Odds are you used one or more credit cards during the holiday season and what felt manageable is now feeling overwhelming. It’s time for you to choose how to handle this debt before it gets out of control with high interest accruing.
Consolidating your debt is a great option. There are multiple ways to handle this based on what type of existing debt you have and how much you owe. One option is to get a Personal Loan. This is a lower interest loan option with a fixed term to pay off. This is ideal if you are often tempted to max out your credit card.
Another great option is to transfer your balances to a Credit Card with a lower interest rate. Balance transfer credit cards often offer an introductory 0% APR on balances you transfer within a certain amount of time. This can reduce interest costs, make your payments more manageable or shorten the payoff period.
Whichever option is a better fit for you, there are plenty of benefits to consolidating your debt.
1. Lower your interest rate
The average credit card interest rate is 18.24% for new offers and 14.54% for existing accounts, according to WalletHub’s Credit Card Landscape Report. Switching to either a personal loan or credit card, can cut the interest rate by at least half, if not more.
2. Make Just One Payment
Consolidating your debts into one monthly payment is much easier to plan for. If too many payments are required each month, there is a much bigger chance of missing one and getting charged late fees. Many credit card companies also increase the interest rate in the case of a late payment. It is easier to plan for one payment when you can predict what the monthly payment should be.
3. Boost Your Credit Score
Paying down your debt can have a positive impact on your credit score which will make you eligible for lower interest rates when you need to borrow in the future. It is also easier to get approved for future lending when you have a lower ratio of debt to income.
It is normal to see a small dip in your credit score when you first consolidate, but this is temporary. In the long run you will get to proudly watch your score climb back up.
4. Get Out of Debt Faster
If you take advantage of a 0% APR offer, your balance won’t add interest during the introductory period. This means that your entire monthly payment will go towards the principal rather than interest — helping you pay off debt faster. 

Use our Debt Consolidation Calculator to determine how much you can save each month.

5. Stress Less
According to the American Psychological Association (APA), 72% of adults report feeling stressed about money. This is pretty significant given financial stress is linked to so many health issues. Going down to one payment means you don’t have to worry each month about covering all the bills. Having a plan can significantly reduce stress.
We are here to help you keep your New Year’s resolutions. Reach out today to talk to a Power Financial Credit Union trusted Personal Service Advisor. They can help you determine which is the best option for you.