The new year will have many people examining the state of their financial affairs and wondering if they could do anything to improve their status. This examination can often cause stress about the amount of debt you are carrying. How can you end the cycle of minimum payments and never-ending credit card debt? Luckily, January also usually brings great offers for debt consolidation loans or balance transfers to lower rate credit cards. But how do you know which one is right for you? Let's take a look!

First, let's get a better idea of what each of these options actually are.

  • Debt Consolidation Loan:  A debt consolidation loan is a loan that is used to pay off another debt, typically more than one. Thus, consolidating multiple payments into one payment.
  • Credit Card Balance Transfer:  A balance transfer is exactly what it sounds like. Transferring the balance of one of more credit cards (typically with high interest rates) to a single credit card (typically with a lower rate).

How do I know if I should consider a debt consolidation or transferring my credit card balances?
The first thing to consider is how you feel about your current debts. If you are managing your current debts, making on-time payments each month, and don't feel stressed about the amount of debt you have, you likely wouldn't need to consider making a change. If you are a person who is stressed about your budget each month and has trouble keeping up with monthly loan and credit card payments, you may want to explore these two options.

Where do I start?
The first thing to do is to make an inventory of all of your loans and credit cards. Include their balance, minimum payment and interest rate. Then look around at your options.  What are the current interest rates on loans and credit cards, are there any specials and what will you qualify for?

Which option is better?
One isn't necessarily always better than the other, it will depend on your specific situation. If you are a person who has trouble creating and sticking to your own payment plan, going with a  debt consolidation loan might be the better choice for you. The debt consolidation loan will likely have a higher minimum payment, but it also has a definite end date. Make "x" number of payments for "x" dollars and your debt will be gone. If you are a person who can create your own payment plan and stay committed to it, transferring your balances to a lower rate credit card would make sense for you. It will give you flexibility in case you run into a tight spot, but doesn't have the same end date if you get off track with your payments.

Which one is right for me?
Take into consideration the total amount of your monthly payments to loans and credit cards before making a change, and what each option would do to that number. If you are looking to lower your monthly expenses, it makes sense to choose the option that maximizes the amount you save each month. Each individual situation will have determining factors of whether a debt consolidation loan or balance transfer is the better choice. Health Care Family Credit Union offers both debt consolidation loans and balance transfers. One of our Member Service Representatives would be happy to look at your options with you. Contact us for more information

314-645-5851 or 866-423-2848