Debt can feel overwhelming, not just because of the balances themselves, but because of how scattered everything becomes over time. Multiple credit cards, different due dates, and interest rates that keep climbing make it hard to feel in control. Many members reach a point where they’re paying every month, but never see the balance move significantly.
That’s where debt consolidation can help. When you consolidate several debts into a single solution, it becomes easier to manage payments and reduce the amount you pay in interest. While debt consolidation doesn’t erase past spending, it does create a clearer, more manageable plan for moving forward and becoming debt-free.
What is Debt Consolidation?
When people hear the term “debt consolidation,” they often think of credit counseling services or some complex and tedious process. However, debt consolidation simply means combining multiple debts into a single repayment plan. Instead of juggling several payments each month, you replace them with a single option that’s easier to manage – and ideally at a lower interest rate.
Example: How Debt Consolidation Works
Imagine you have three credit cards with various balances and interest rates:
|
Credit Card |
Interest Rate (APR) |
Outstanding Balance |
|
Card A |
22% |
$2,500 |
|
Card B |
19% |
$1,250 |
|
Card C |
24% |
$3,000 |
Your total outstanding credit card debt is $6,750. Through debt consolidation, you can transfer those balances to a new $6,750 loan with a lower interest rate, for example, 10% APR.
You’ll immediately save money, and you’ll now only need to make one monthly payment instead of several.
Debt consolidation doesn’t make the debt disappear, but it often makes repayment far less stressful and provides instant savings you can see.
Your Options to Consolidate Debt
There’s no one-size-fits-all solution. The best tool depends on the size of your debt, your income, and which repayment style feels most realistic for you. Below are three common options members use, along with examples of when each tool works best.
Credit Card Balance Transfer
Best for: Lower to Moderate Credit Card Balances
A balance transfer lets you move high-interest credit card balances onto a new credit card with a lower rate. Balance transfers are easy to complete and often require minimal effort on your part.
This strategy works well when debt is still manageable. For example, if you’re carrying $2,000 across several cards, transferring those balances into one, lower-rate credit union card can give you immediate breathing room. Instead of watching 20% interest eat up your payments, more of your money goes toward the principal balance (the amount you owe).
The Benefits of Balance Transfers:
Members often like balance transfers because they offer instant relief. The moment the balance moves, your interest costs drop significantly.
Some key benefits include:
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Lower interest costs can mean faster repayment progress.
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Fewer bills and due dates to juggle make managing your money easier.
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Flexibility to pay at your own pace instead of a set payment schedule.
A Few Things to Keep in Mind:
Not all balance transfers are the same. Some lenders may charge a balance transfer fee, and promotional rates aren’t always permanent. New purchases on a promotional card might carry a different interest rate, too.
Also, because balance transfers move your balance to another credit card instead of a loan, you’re only required to make minimum monthly payments. It helps to create a repayment plan to ensure you’re moving the needle consistently to lower your debt.
This debt consolidation tool works best when your goal is quick savings and a simpler repayment – not necessarily a long-term repayment structure.
Move your high-interest credit card debt to a card with a lower rate. Balance Transfer introductory rate of 1.99% for 12 months beginning 2/1/26.
LMFCU Visa Platinum Credit Card Information
Personal Loan
Best for: Moderate to Higher Debt (or Members Seeking Structure)
A personal loan combines your existing high-interest credit card debt into one, fixed loan with a clear monthly payment. Instead of revolving balances, you now have a specific payoff date. These loans function very similarly to a traditional car loan.
For many members, this tool brings a sense of direction. When you’re paying minimums on several credit cards, progress can feel almost invisible. But with a personal loan, you know exactly how much you’ll pay monthly and when you’ll become debt-free.
A simple example can illustrate the difference:
If you’re paying $250 a month total toward several credit cards but barely touch the principal balance, switching to a personal loan at a lower rate could mean the same $250 works harder. You’re reducing your balance every month because the interest isn’t as overwhelming, and the loan is structured.
Key Advantages of a Personal Loan:
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Interest rates are often substantially lower than those of traditional credit cards.
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Predictable payments make it easier to budget monthly.
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A set timeline to become debt-free helps you to remain focused and motivated.
What to Consider:
Personal loans offer structure, but structure can feel restrictive if you need more flexibility from month to month. And once the personal loan pays off the credit cards, it’s important not to start using them again, or you could end up with double debt (your new personal loan + new balances you add to your old credit cards).
Personal loans work well for members who like a plan, want consistent payments, and feel motivated by having a defined finish line.
A personal loan is an unsecured installment loan with a fixed interest rate and repayment term. Rates as low as 8.49%.
Additional Personal Loan Information
Home Equity Line of Credit (HELOC)
Best for: High Credit Card Balances (or Members Needing Lower Monthly Payments)
A HELOC allows homeowners to borrow against the equity in their home. Because your property secures the loan, rates are often significantly lower than those for credit cards or personal loans. Plus, HELOCs are typically long-term loans, offering terms up to 10 years or more. These features make HELOCs a powerful tool when credit card debt has grown too large to manage comfortably.
Picture a situation where someone has $15,000 or more split across multiple credit cards. Minimums feel never-ending, and the interest charges alone eat up a substantial portion of the budget monthly. A HELOC could take that entire amount and convert it into a single, lower-rate line of credit, resulting in radically lower payments.
Why Members Choose a HELOC:
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Lower interest rates can dramatically reduce interest costs and provide more breathing room.
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Longer repayment terms spread out the payments – allowing them to fit almost any budget.
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HELOCs provide flexibility by allowing you to only pay interest on what you borrow (not your approved loan amount).
Important Considerations Regarding HELOCs:
A HELOC uses your home as collateral, which means it requires thoughtful planning. Rates may adjust over time, and it’s important to avoid pulling more funds from the line of credit once debt has been consolidated. You don’t want to use HELOC funds frivolously because if you cannot repay the balance, you’re putting your home at risk.
HELOCs are best used as a one-time reset – not an ongoing source of spending. For members with significant credit card debt who need both lower payments and long-term savings, a HELOC can provide the relief other options cannot.
A HELOC is a revolving line of credit secured by your home with an introductory rate of 2.49% for 12 months.
Additional Home Equity Loan Information
Fixed Rate Home Equity Loan
A fixed-rate home equity loan provides a lump sum with predictable monthly payments over a set term with a fixed rate. Rates as low as 4.99%
Additional Fixed Rate Home Equity Loan Information
Choosing the Right Tool for Your Situation
The right consolidation strategy depends on your total debt, income stability, and personal habits. Some members prefer flexibility, while others feel more confident with structure. Here are a few questions you can help guide your choice:
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How much total credit card debt do you want to consolidate?
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Do you prefer flexible payments or a fixed monthly amount?
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Are you looking for quick interest relief or long-term savings?
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Do you own a home with available equity?
There’s no perfect answer. What matters is choosing the tool that reduces interest, fits your budget, and helps you move forward with more confidence than before.
We’re Here to Help!
Debt consolidation isn’t about erasing the past. It’s about giving yourself a clearer path forward. When you understand your options, you can choose a solution that makes your payments easier to manage and helps you feel more in control of your financial future.
If you want to learn more about balance transfers, personal loans, or HELOCs, we’re happy to help answer all your questions. Please stop by the Credit Union or call 410-687-5240 to schedule an appointment with a member of our lending team.