Smart Money Monday - Debt Consolidation - Hawaii News Now - KGMB and KHNL

Smart Money Monday - Debt Consolidation

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(HawaiiNewsNow) - Our current economy is driven by consumer credit, which makes it quite easy for the average person to find themselves in debt. One way to help people get out of debt is debt consolidation. Here to talk more about this is Denise Smith from Bank of Hawaii.

What exactly is debt consolidation?

     Process of centralizing debt into one location

     Hope of lowering monthly payment and interest rate

     One payment usually means less likely to forget making payment

     Boils down to convenience, cost savings and ability to pay off debt quicker

What type of options do people have with debt consolidation?

     Different options, so important to look at your financial situation and decide which works best for you

     Home equity credit line – home is used as collateral; allows lower interest rate; tax benefits

     Unsecured debt consolidation loans – paying off number of unsecured loans (credit cards) using another loan

     Good for credit card debt because credit cards usually carry much higher interest rate than other unsecured loans

Can you map out a debt consolidation plan on your own or do you need a professional to do that?

     Depending on how much debt to pay off – can do it on your own

    Steps: find out how much debt; how much income; how much can pay off each month; decide which to pay off first and start that payment plan

     Once pay off first debt, continue the cycle with the next until all debt paid off

How does someone decide which debt to pay off first?

     Usually best to pay off either one with highest interest rate or lowest balance first

What to Avoid with Debt Consolidation

  1. Do not miss a payment or make a late payment.
  2. Avoid making any major purchases while paying off debt.
  3. Don't take out new loans or credit cards.
  4. Avoid charging up credit card close to or above credit limit.
  5. Don't make any balance transfers while paying off debt. 

Bank of Hawaii will be offering free seminars to the public throughout the year. To see the seminar schedule, visit Bank of Hawaii.