There are many ways that people in Helena, MT, can find themselves juggling multiple credit card pays, car loans, personal loans or any other number of debts. With various interest rates and high penalties for missed, partial or late payments, debts can quickly begin to snowball and turn initially easy to manage payments into significant problems for hard-working families.
Consolidating Debt
One option to manage debt and to create a budgeted amount for a payment every month is to consider a debt consolidation loan. This is borrowing an amount of money that is used to pay off the high-interest rate credit cards and debts.
The borrower then pays off the loan, which will be at a significantly lower interest rate, often as much as 10-15% lower or more. Additionally, with the debt paid off, there is no risk of additional penalties or interest rate hikes, providing repayment stability while also building up your credit score.
How Much to Borrow?
It is essential to only borrow the amount on a debt consolidation loan that can be managed with a monthly payment. For many people in Helena, MT, all of their credit card, car loan and other types of debts can be covered by the loan with a manageable monthly payment.
If it is not possible to include all the debt, calculate the cost of paying off the highest interest rate types of debts. This will offer some additional benefit as lower interest rates mean you can pay more towards the principal on some debts as compared to others.
When taking out a debt consolidation loan, resist the temptation to pay off the credit cards and then start using them again. The key is to avoid using these cards at all, lowering your total debt and maintaining a low debt to income ratio in the future.
