Little Debts Add UpOne credit card with $300 may not seem like much, but add a handful of $300 debts up? YIKES.
Consolidate with a Personal LoanGetting another loan to pay off your debt seems counterintuitive, but we promise it works.
Credit Union vs Bank LoanYou can pay off debt even faster with a credit union loan. Lower interest rates and fewer fees!
When people talk about being “in debt,” it often seems like something that would never happen to you. That’s partially because we often imagine debt to be some massive sum of money, hundreds of thousands of dollars you’ve accidentally spent on something crazy, like an antique doll collection (no judgment) or the four cars you bought (a little judgment — how many cars do you need?)
And everyone had student debt, right? So that doesn’t even count.
The truth is, it’s easy to fall into smaller debts that feel like flies buzzing around your head. And just like flies, they’re not particularly challenging to get rid of … unless there’s more than one.
When we start working to consolidate our debt, many of us never consider comparing a credit union vs bank loan.
In fact, if you’re anything like us, joining a credit union hasn’t even crossed your mind. You’re probably just using the same bank your parents used to help you open your first bank account years ago.
But when working through your debt, it’s a good idea to consider all your options. In this post, we’re going to talk about some of the best ways you can pay off your debts with a credit union vs bank loan.
The first step to solving any financial issue is getting organized.
When you have a number of small debts, you’ll need to start by using a personal budget — not only to monitor your spending but also your debt. There should be a section of your budget specifically allocated to debt.
If you don’t have this, it’s like trying to swat those flies from before only in the dark and without using your arms. You’re basically just hoping you hit something.
Without an actual debt section in your budget, you’ll tell yourself, “I’ll just pay it off when I’ve got spare change,” but when do we ever have spare change? Any time you have spare money, you immediately spend it on fun stuff. Obviously.
While budgeting is a good place to start, there are other ways to start working on these smaller debts, including personal loans. There’s a good chance you’re thinking, “Why would I take out a loan to pay back what is essentially also a loan?”
And let me tell you: good question.
A personal loan is a great option if you have lots of smaller debts, because it takes all of them and consolidates them into one loan.
So instead of trying to swat a bunch of flies, you just have to defeat the final boss: One Medium-Sized Fly.
(I will stop with the flies metaphor. They’re gross.)
How it works is you take out a personal debt consolidation loan equaling the sum of all your other debts. From there, you pay off those debts using that loan. Now, you have a consolidated loan — no other bills to worry about — that you can factor into your above budget.
Types of Loans
We understand if you’re skeptical about getting a new loan of any kind. Watching debt becoming a different type of debt might not sound like something worth your time.
But it can be a highly effective way of making your debt more efficient, so you can pay it off in an easier way. If your debt includes credit card debt and the like, it’s likely that this personal loan will have a lower interest rate, too, especially if it’s from a credit union.
In short, it’s all about simplifying.
Once you make the decision to get a personal loan to consolidate your debt, it’s time to figure out what’s best for you: a credit union vs bank loan. Credit unions are member-owned financial institutions, functioning similarly to banks but with some key differences.
For example, when credit unions are profitable, the customer benefits directly through lower interest rates on loans, including personal loans. They’re also easier to get if you have bad credit, as credit unions were specifically founded to help level the playing field when it comes to wealth inequality. This also means that if you were unable to get a loan at a bank, it might be easier for you at a credit union.
Banks vs. Credit Unions
If you’re first starting out with your personal finances, a credit union might be the best option not only for your personal loans but for any checking or savings accounts you’re wanting to open. If you’re not familiar, chances are that “credit union” just sounds like a synonym for bank, but a credit union vs bank loan is actually very different.
As we mentioned, credit unions are owned by their members and not some old dudes in a boardroom sipping whiskey that your money bought.
The goal of a credit union is to help the members of their community with whatever challenges they’re facing, whether that’s debt consolidation, savings accounts (with higher interest rates, since, well, there aren’t any bankers for that interest to go to), or purchasing their first home.
After you’ve sat down and gotten your budget together, maybe it’s time to reconsider your financial options. If your bank fits all your needs, great! But if not, a credit union might be the way to go.