Consolidating your debt can be a cost-effective way of managing your finances and saving money.

Why consolidate your debt?

Any time you use one form of financing to pay off other debts, you’re consolidating debt. And although it may seem daunting at times, doing it can literally save you hundreds of dollars a year. Consolidating your debt is also convenient because it allows you to pay down balances with one monthly payment, often with a lower interest rate. Don’t forget, the smartest way to consolidate debt is to choose a course that avoids taking on more debt.

Interest rate on financed purchases

The amount a lender (bank, credit union, etc.) charges a borrower (you) for the use of assets such as cash, consumer goods, cars, homes, buildings, etc. An interest rate is a percentage of principal, and is generally reflected on an annual basis known as APR (annual percentage rate). High interest rates can make it very difficult to pay off debt because if you don't pay more than what is owed each month in interest, you'll never pay down the original amount of the purchase.

Ways to consolidate debt

Transfer balances to a lower-rate card or loan

Reduce the interest charges you pay by transferring debt to a credit card or a personal loan with a lower fixed rate. A lower interest rate can help you save money long term by reducing the total amount you pay towards interest on your loan.

Home equity loan

Taking out a home equity loan, basically borrowing money against the equity in your home), allows you access to a large amount of cash to be paid back over a specified period of time. Because home loans carry a fixed interest rate, the amount of your payment will not change over time.

Consolidate student loan debt

Consolidating student loans allows you to pay one borrower instead many. And because there are several providers who offer student loan refinancing, you may be able to find a lower interest rate than you’re currently paying.

Regardless of which option you use to consolidate your date, make sure to protect your money by choosing a credit card or loan with a low annual percentage rate (APR). An APR is the annual rate you’re charged for borrowing money, whether it’s a credit card or a loan.

Note: make sure to check and see if you qualify for federal student loan forgiveness click here for more information.

If you’d like to learn more about credit cards, low rates and credit card programs offered by CTA, visit http://www.ctamemberbenefits.org/cc