Is Debt Consolidation Right for You?

Where to get a debt consolidation loan

When you’re ready to consolidate your debt, you’ll need to find the right lender. Here’s what to know about your options.

• Credit unions. Credit unions are a good option when considering where to get a consolidation loan. Credit unions are known for being focused on their members and, as a result, you could find lower interest rates, fewer fees, and more flexible terms than you might get at a traditional bank. At Virginia Credit Union, we are dedicated to serving our members, and we make applying for a personal loan quick and easy. If you own a home, a home equity loan could be the right fit for you. 
• Banks. Banks also offer loans for debt consolidation. Typically, existing members and those with a strong credit history are more likely to be approved.
• Online lenders. There are a variety of online lenders who offer this service, but it’s crucial to be cautious online. Some lenders advertise “guaranteed approval” or charge large upfront fees which are red flags. Ensure that the new interest rate (plus any added fees) will be less than what you’re paying on your current debts. A legitimate lender will evaluate your ability to repay the loan and won’t charge fees just to apply. 

 You may qualify for an unsecured personal loan, based on your credit history and income, or for a secured loan, which is backed by an asset you own, like a car or house. A home equity loan is a type of secured loan. Secured loans typically come with lower interest rates but do involve more risk, since they’re backed by your assets as collateral. 

Potential drawbacks of debt consolidation

Debt consolidation might not make sense in every situation. Take a look at the potential drawbacks along with your personal finance history and decide if the benefits outweigh the risks.

• High fees may be charged. Avoid high-fee lenders. If a company asks you to pay money before you’ve received your loan, it’s likely a scam.
• Missed payments will cost you. Don’t use consolidation as a quick fix. It only works to your advantage if you can avoid accumulating new debt on any other credit cards or personal loans.
• Secured loans come with risk. If you decide on a secured consolidation loan and use your home as collateral and fall behind with payments, you could face foreclosure.

Taking the first step to debt consolidation 

Debt consolidation can be a smart, empowering choice, especially when done through a trusted institution like your credit union. 

Check Virginia Credit Union’s personal loan rates and compare your options. Be informed. Be selective. We can help you understand your options, so you can find a debt strategy that supports your long-term financial wellness.

Alternatives to debt consolidation

If you’re unable to qualify for a debt consolidation loan, there are other options you can explore to tackle debt, such as a debt management plan. 

A debt management plan lets you make one monthly payment through a credit counseling agency. The payment goes to your creditors (often at lower interest rates and fees), and unlike a debt consolidation loan, you don’t take on new debt — you just pay off what you already owe in a more manageable way. We’ve partnered with GreenPath Financial Wellness, a trusted national nonprofit, to offer you free individualized counseling and guidance, including debt management plans.