• Bill Payment Becomes Less Costly
Instead of tracking various due dates each month, consolidation gives you just one payment to remember. That means fewer chances to forget and no late fees sneaking in. While proposed federal regulations were expected to put an $8 cap on credit card late fees, that never took effect. You can still expect to pay a penalty of $30 for the first missed payment and $41 for subsequent missed payments.
• One Loan Could Mean Smaller Payments
Credit cards can charge triple the interest (and sometimes more) of personal loans. When you replace multiple high-rate cards with a lower-rate loan, your monthly cost can shrink fast. Let’s say you owe $12,000 on several cards that average 24% APR. Depending on how each card issuer calculates minimum payment requirements, you might need to pay around $480 in total monthly payments.1 Switching to a 9% personal loan with a five (5) year repayment period drops your total payment to $249 a month.2 That’s $231 extra in your wallet every month that could be put toward emergency savings, a new car fund, or something fun you’ve been putting off.
• Fixed Payments Create Predictability
With credit cards, your minimum payment can change even if you stop making additional purchases. Unpaid balances continue to grow at a fast pace due to interest, especially with higher rate cards. A consolidation loan comes with a fixed low rate and a fixed payment, so you know exactly what’s due each time.
You can even set up auto-pay around your payday to make it effortless. That stability makes budgeting simpler and keeps surprises off your plate.
• Every Dollar Works Harder
When you carry credit card balances, you’re often paying interest on top of interest. Switching to a lower fixed-rate loan can save thousands over time since less of the payment is lost to interest charges. That’s money you can use to achieve other financial goals, reduce money stress, or create peace of mind.
• Debt Payoff Can Arrive Sooner
Choosing debt consolidation with a shorter loan term of 12 months, instead of five (5) years, accelerates the time it takes for you to become debt-free. This can be the motivation you need to eliminate lingering debt so you can redirect money toward increased retirement contributions, a new business venture, or other goals you’ve been putting off. Even with a longer repayment term, you’ll likely reach a zero balance faster than if you kept making minimum payments on higher-interest debts.
*TIP* Use a loan consolidation calculator to estimate how much a shorter loan period and lower interest rate can affect your budget.
Other Considerations
Remember that consolidating isn’t magic. You’ll still owe what you borrowed, but it can completely change how you experience your budget. It offers a simpler payment routine and more financial breathing room so you can achieve your other goals.
Let HawaiiUSA help you figure out if consolidation could work for you. Connect with us through live chat, over the phone, or in-person. We’re happy to walk through the numbers together.
1GreenPath Financial Wellness, “Credit Card Minimum Payment Calculator”, https://www.greenpath.com/resources-tools/calculators/credit-card-minimum-payment-calculator/.
2HawaiiUSA Federal Credit Union, “Debt Consolidation Calculator”, https://www.hawaiiusafcu.com/resources/planning-tools/calculators/debt-consolidation.
