This is part 2 of 3 in a series where I expand on the post where I said you can save money by reducing your interest rate. I decided to write this post because I wanted to share one of my favorite ways to reduce the amount of interest that you pay when you are working on getting rid of your debt.
When you are faced with a mountain of debt it can seem like you will never be able to get rid of it. This can be especially true if you have credit card debt with high interest rates. It seems that the more you pay on the card the more you end up paying and the balance never seems to get lower.
If you are unable to totally get rid of the debt you may be able to save money by using a consolidation strategy. When you consolidate your debt you simply take all of your high interest balances and combine them into a lower interest balance. I used this strategy in the past and got a Personal Loan at about 9% and combined the balances on credit cards that had 21% and 19% each.
By combining the two larger interest debts I was able to get a more manageable monthly payment and this really helped out with my monthly budget. You do not have to use the same system I used but you can use any method that you like.
The important thing is to note that the interest rate will be lower after the consolidation which will allow you to reduce the total amount of interest that you pay over the life of your debt. You may able to save a considerable amount of money by making lower payments every month and paying less interest, as long as you pay off the new loan before the end of the time period.
The thing that I really liked about Lending Club is that unlike some other loans and debt consolidation programs there is no penalty for early payoff. So you will not face any negative consequence if you have a little extra money and decide to make more than your scheduled payment OR even if you pay off your loan early.
You have to be very careful if you choose this route because you have to stay on top of the monthly payments. You should also be very careful to NOT use the savings that you are getting every month as an excuse to go out and spend more and rack up even more debt.
Another way that you may be able to consolidate your debt is through a home equity line of credit. If you are renter (as I am) this may not be an option for you and I will not write about it here since I have not personally used that particular method.
Please note that the links to Lending Club within this post are affiliate links and I will receive a referral bonus if you use them to join the program. I have NOT been paid by Lending Club or anyone else to write this post and will receive no other form of compensation for this post.