Credit cards are a convenient way to make purchases. If not used carefully, however, they can also lead to a high interest debt which can become challenging to keep track of what is owed to whom and when payments are due. This is where America's Credit Union can provide debt consolidation to its members.

Consolidation of debt can simplify finances and potentially reduce monthly payments. It is very helpful when ACU members have equity in their homes; have balances on high-rate credit cards or other types of consumer debt; have multiple large monthly payments; and would like to increase residual income.

Specific to credit cards, consolidation can also reduce interest rates, thus saving money. With lower interest rates, more of the payment goes to paying of the principal debt sooner.

For those members who might need some assistance, Kaila Sweeney, an ACU home loan consultant, suggests that members meet with an ACU representative to discuss their current debt/income ratio; compare current rates/payments to what the new rates/payments would be; and confirm that consolidation will be a financial benefit that helps the borrowers meet their financial goals.

"Benefits may include decreasing monthly outgoing, improving overall rates, and having money left after monthly obligations are met," Sweeney explained.

For example, if an ACU member has a current home mortgage rate of 3.50 percent but is paying 15 to 20 percent on multiple credit cards/consumer debts, consolidating these debts - even to a higher mortgage rate - will save money on outgoing obligations and interest being paid to lenders.

"It also wraps multiple payments into one payment," Sweeney added.

Another option to keep in mind is to consider an ACU credit card.

For example, if a member has three credit cards with multiple balances of $5,000, $7,000 and $10,000 at interest rates of 22 percent, 24 percent and 20 percent, respectively, the minimum monthly payment would be approximately $774 - along with the over $16,000 in interest paid over five years.

If these balances are consolidated into a credit card with an 11 percent APR through America's Credit Union, those monthly payments would be about $530 and the interest paid over five years would be about $4,500 - a savings of over $11,000.

Sweeney also pointed out that among the other types of consolidation loans, a VA cash-out refinance is the only VA-specific loan available that can be used to consolidate debt.

"This will typically be the most cost effective way to go," she explained.

She explained that a VA Interest Rate Reduction Refinance Loan (VA IRRRL) is a streamlined program that VA loan holders can utilize to take advantage of market rate decreases. 

"It has lower fees, no appraisal requirement, and closes more quickly than a conventional refinance," said Sweeney. "You cannot take cash-out on this program, but you can use it to refinance to lower your rate and payment."

With ACU's commitment to bettering the lives of its members as its top priority, the staff at your America's Credit Union are ready to help.

"Do not hesitate to reach out to us if you are curious about anything VA loan related," concluded Sweeney.

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