Control Your Financial Future with Debt Consolidation
Why take steps to save on interest, lower your monthly bills and simplify your payments? Because they’re tools to take control of your financial future – and if 2020 has taught us anything, it’s the importance of learning to handle the unforeseen. More than a year into the global COVID-19 pandemic and the resulting social and economic roller coaster, many Americans are still feeling their finances impacted – and they’re anticipating that will continue.
In turbulent times, paying down and consolidating debt can help you maintain financial stability, manage your budget and build savings as you work toward a debt-free future.
Paying Down Debt, Step by Step
Start your plan for paying off debt with these three simple steps:
- Write down what you owe.
- Determine how much you can realistically pay toward your debt each month.
- Decide the best way to use that money to reduce debt.
When tackling the first step, make sure to note your minimum monthly payments, as well as the interest rates on each loan or credit card.
For step two, begin with your monthly net income, then subtract your financial obligations, including household bills, food and expenses such as gas, savings and the minimum payments you’ve noted for your debt accounts. The amount left is what you can spend on paying down your debt.
In considering step three, one common method is called the "avalanche" approach, a top-down strategy in which you tackle debts with the highest interest rate first.
You put your leftover funds toward the balance with the highest interest rate each month, and when that debt is gone, you apply the money to the next highest interest rate.
Benefits of Debt Consolidation
There are several good reasons to look into consolidating your debt, to deliver on savings and simplification.
A KeyBank personal loan is one way to consolidate your debt. Personal loans start at $5,000 and offer flexible terms up to 84 months1 with no collateral required and no origination or prepayment penalty fees. This will help you maintain a budget, since you’ll lock in a fixed rate and a set monthly payment, while freeing up some cash flow that can be used to build savings. It’s a convenient solution, too: Funds can be available as soon as the same day you apply at any branch.2
The most basic reason to consolidate your debt is to save time and make your life a little easier: Debt consolidation can mean keeping track of just one regular monthly loan payment instead of juggling multiple payments with different due dates and payees. And having that fixed monthly payment in your budget provides a measure of stability and predictability to ease your planning.
Additionally, consolidating your debt can save you money through factors such as a lower interest rate and potentially a lower monthly payment,3 or the opportunity for 0% balance transfer offers, both of which enable you to pay down debt faster and put more of your hard-earned money into savings.
Another debt consolidation tool is the KeyBank Latitude® Credit Card. Balances from other debts transferred onto this card within the first 60 days are charged 0% introductory APR for the first 15 billing cycles,4 giving you an opportunity to pay that debt down more effectively. After that, your APR will be 17.24% to 24.24% based on your creditworthiness. There is no annual fee for this card, so you get flexibility to pay for things you need while you manage your budget, along with a low continuing APR, and security features such as easily locking and unlocking a misplaced card.
If you’re a homeowner, you can find several paths toward debt consolidation right under your roof, including a Key Equity Options® Home Equity Line of Credit (HELOC), a Home Equity Loan or Mortgage Refinancing. In each case, these paths offer simplification and, potentially, a lower interest rate, along with other advantages such as options for fixed or variable rates and flexible payment possibilities. They could also help you pay off other high-interest debt and put more money into saving for the future.
- The benefit of a home equity line of credit is continuous access to credit based on the available equity in your home, functioning similarly to a credit card, but with your house used as collateral. This approach means your balance and payments month to month may vary, but it provides ongoing flexibility.
- A home equity loan, by comparison, is a one-time distribution loan against the equity in your home with a fixed rate and payment term. This solution protects against rising interest rates and makes budgeting easy with uniform, planned payments.
- Refinancing your mortgage can be used to help consolidate or reduce debt in one of two ways. Leveraging the equity in your home for a cash-out refinance provides money to help pay off other existing high-interest debt. Or you could choose a rate/term refinance to lower your monthly payments and better address your budget needs. KeyBank offers a suite of options, competitive rates and dedicated mortgage loan officers to assist you every step of the way.
Working toward a debt-free life is challenging, but rewarding: It puts more money in your pocket to spend, save or invest; it eases worry and stress; it improves your credit score; and it opens up possibilities for new financial goals. Expanding your dreams is a good thing – and KeyBank can help.
Use KeyBank’s debt consolidation calculator to start your journey.