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Are Debt Consolidation Loans Worth It? Here's how to Find Out

Lisett Comai-Legrand

Lisett Comai-Legrand About The Author

Jan 14, 2020 7:26:00 AM

If you’re trying to figure out how to get out of debt, chances are you’ve probably heard about debt consolidation loans and how they help people get out of debt. You probably know how they work, too. Just take out a loan that equals the total amount you owe, use that money to pay off your existing debts, and then pay off the loan. You might have even heard about the benefits, like reducing the number of payments you have to make each month and saving money thanks to a much lower interest rate.

The problem? While all these benefits sound nice, you have no idea if they apply to your specific situation.

 Are debt consolidation loans worth it for you?  

Are debt consolidation loans worth it

 Fortunately, it’s not hard to figure out if a debt consolidation loan is your best choice to pay off debt. All you have to do is follow a few simple steps and you’ll be able to see if a debt consolidation loan is worth it. If that isn’t easy enough, you can download our debt consolidation calculator, which will do the math for you.

Get the free debt consolidation calculator to follow along!

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Step 1: List Your Debts and Add Them Up

The first thing to do is write down every debt you owe. Once you’ve done that, you’ll want to write down how much you owe next to each debt, as well as your monthly payment and your interest rate. This will give you an overview of the total amount you owe and what you can expect to pay every month.

If you’re using the debt consolidation calculator, it will add up your total balances and your total monthly payments for you. Additionally, it will also calculate your average rate of interest, and it will even calculate how long you’ll be paying off your loans and how much interest you’ll pay on each one.

Step 2: Compute Your Loan Payments

Once you know how much you’ll be paying, you’ll need to figure out the payment you would make on a loan to consolidate your debt. While you can use the credit union’s website to estimate the interest rate and term of your loan to come up with a monthly payment, a simpler way is to just reach out to a lending advisor and ask for an estimate. They’ll be happy to help.

However, you can also get that information with the First Alliance debt consolidation calculator. It has the most up-to-date interest rates for personal loans and can even adjust the interest rate to account for your current credit score. All you have to do is put in:

  • How much you need to borrow
  • Your credit score
  • The term of the loan

The debt consolidation calculator will automatically calculate your monthly payment. However, just remember this amount is only an estimate, and if you do decide to take out a debt consolidation loan you’ll want to double-check the amount with a lending advisor. It's also worth pointing out that a secured debt consolidation loan like a home equity loan will have a lower interest rate, but the trade-off is you'll have to put up something as collateral, like your house.

Is debt consolidation worth it

Step 3: Compare the Savings

This is the fun part. Take a look at the monthly payment you’ll make with the debt consolidation loan and compare it with your monthly debt payments. The odds are good you’re going to be saving money. If you’re using the debt consolidation calculator you’ll also see how much you’ll save in interest and whether you’ll also be able to pay off the amount you owe in less time.  

For even more information, check out our Facebook Live Debt Consolidation Q&A


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Consolidate Your Debts With First Alliance Credit Union 

Debt consolidation can help save you money, time and interest, all while getting you out of debt faster. You can determine if consolidating your debts is worth it by listing all your debts, along with their interest rate and monthly payment, and then figuring out what your interest rate and monthly payment would be on a debt consolidation loan. Once you’ve done that, add up the debt payments you make each month and compare that total against the monthly payment you’d make on a debt consolidation loan.

While you can do all this by hand, using the free downloadable First Alliance Credit Union debt consolidation calculator will make the process a lot easier. Plus, you’ll be able to see just how much you’ll save, both in monthly payments and in interest. If you’re dealing with debt, this information could be a game-changer, and it takes only minutes to do.

We do our best to provide helpful information but we cannot guarantee the accuracy or completeness of the information presented in the article, under no circumstance does the information provided constitute legal advice. You are responsible for independently verifying the information if you intend to use it in any way. Additionally, the content is not intended to be reflective of First Alliance Credit Union’s products or services, for accurate and complete details about our product and service information you must speak to an advisor at First Alliance Credit Union.