December 29, 2022Why You Should Consolidate Debt in the New Year

The holiday season has come and gone. While you can’t put a price tag on the memories, you might feel the burden of the debt accrued from making those memories. If you’re a bit anxious about paying back your holiday debt, there’s a relatively easy solution – debt consolidation.  

Consolidating debt may sound complicated and more intimidating than slowly paying down your current balance. However, the process is easier than you might think, and it could save you a significant amount of money long term. It’s a win-win!  

What is Debt Consolidation? 

Debt consolidation is transferring one or multiple loans or credit card balances to either another credit card or loan. Instead of paying three or four credit card bills every month, you’d simplify by having only one payment and one account to manage monthly. Plus, consolidation can save you a lot of money when the interest rate is lower.   

You can move much of your current debt to only one account—like a new credit card, personal loan, or even home equity loan. At PEFCU, we recommend a home equity loan or a personal loan. Visit for rates and terms.    

Why You Should Consolidate Debt: 

There are many benefits of consolidating debt, including: 

Save on Interest. If you have several high-interest credit cards, transferring all outstanding balances to a lower-rate card or loan will help you save a significant amount in monthly finance charges. Plus, instead of paying several different interest rates each month, you’re only paying one interest rate, resulting in significant savings. Always look for the credit card or personal loan with the lowest interest rate and from an institution you trust to have your best interests at heart.  

Note: Some credit cards may offer a special introductory interest rate but be sure to read the fine print so you understand exactly when the rate will increase and by how much. You may be stuck paying a higher rate than you initially thought. At PEFCU, our credit cards rates are low and fixed for purchases and balance transfers—no hidden fees! Visit to see our current credit card rates. 

Easier Money Management. If you currently have several different credit cards or short-term loans, consolidating them all into a single new credit card or loan is a wise move. Instead of keeping up with a handful of due dates and payment amounts, you’ll only have to make one payment each month.    

Quicker Payoff. When managing various credit card debts with high balances, it’s easy to fall into the trap of only making your minimum monthly payments. You are only paying the interest accrued on the card and not the principal when you only pay the minimum, and you’ll never really see your balance go down.   

When you consolidate all your current debts into a personal loan or a home equity loan from the credit union, you’ll have a set monthly payment amount (just like your car loan payment). This strategy helps you pay off debt quicker and reduce the amount of interest you pay long term. 

Boost Your Credit Score. If your credit score took a hit due to your holiday spending, consolidating your debt could help it get back on track. This is especially true if you use a personal loan to consolidate your debt because you will decrease your credit utilization ratio (CUR) 

Your credit utilization ratio is a formula that lenders use to see how well you can manage debt. It shows the total amount owed on your credit cards and loans compared to your total available credit.  

You can calculate this ratio by taking all of your outstanding credit card balances and dividing them by your total credit card limits, and then multiplying that number by 100 to get a percentage. Lenders want this figure to remain below 25%. As you pay down your debt, this ratio will also go down, causing your credit score to increase. Essentially, you could begin to see a boost to your score in just a few months.   

Decrease Stress. Large amounts of debt without a plan to pay it off can add significant stress to your life. When you consolidate your debt, you’re taking control of your finances and bringing some organization to your life, which will help to reduce your financial anxiety.   

We’re Here to Help! 

High amounts of debt can adversely affect your overall financial and mental health. Debt consolidation can be a great option to get your finances under control and ultimately pay off your debt quicker while saving you a significant amount of money.  

If you are considering consolidating your debt into a personal loan or credit card with a low, fixed rate, we are ready to help with any additional questions.  

Please stop by any of our convenient branch locations or call 800-226-6673 today. Our skilled professionals can help assess your current credit lines and balances to help you form a plan to pay the debt off with less stress.  



Each individual’s financial situation is unique and readers are encouraged to contact PEFCU when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.  

Federally Insured by NCUA 

Equal Housing Lender 

Leave a Reply

Your email address will not be published. Required fields are marked *