Feb 8, 2022
On this episode of Financially Naked: Stories from The Financial Gym, two of our Certified Financial Trainers are discussing consolidation loans. If you have less than $10k in debt, one option is balance transfer cards. For debt greater than $10k, consolidation loans are a better option. Kadri and Mike are co-hosting today to talk through what consolidation loans are, how to address underlying issues before taking one out, and best practices to help you stay focused on the debt payoff journey.
Podcast Notes
- If you have more than $10,000 in debt, loan consolidation can be a great option.
- It is a personal loan that is used to pay off all of your balances. Instead of managing 5-6 different debts at high interest rates, you can focus on the single loan. It makes for more seamless debt management and more stable interest rates.
- One of the most important steps is to address the underlying reasons for the debt. Reflect and be honest with yourself.
- Are you living above your means? Was there a big expense you had to take care of? It is a mix of everything? Life happens, give yourself grace, but don’t ignore the reality.
- Since the personal loan will open all your other lines of credit, not using those cards, or digging yourself deeper into the hole, is vital.
- Loan consolidation is a tool and you have to put in the work to use it wisely.
- Take the time to look at all of the different options and really understand the lending contract before signing.
- A higher credit score will give you more availability when choosing a loan.
- If you continue to make payments and live within your means while paying off the loan, your credit score will likely jump. This is because when the credit lines are open, overall utilization is lowered, which helps increase your credit score.
- More options will become available as your credit score goes up. Debt payoff can take many years, and more progress opens up more options.
- If you apply for a loan and the interest rate is higher than what you’re already paying, loan consolidation might not be the best fit.
- Be realistic about what monthly payment is going to work for you.
- Be sure to save money while working on the debt. It is impossible to break out of the debt cycle if you are not saving at the same time.
- Money is emotional, there is often shame attached to debt. Have compassion for yourself, the past is in the past. Feel empowered by your mistakes because they give you the opportunity to make a change.
- If you need more help with navigating your debt options, check out the new Trainer on Demand program!
- If you are looking to consolidate debt, check out the B.F.F. Approved Personal Loan Page.
Meet The Trainer
Meet Kadri, Level 3 Certified Financial Trainer
Meet Mike, Level 2 Certified Financial Trainer and Head of Trainer on Demand