Understanding Debt Consolidation | SCFCU


Take your 5 payments and make them 1

Consolidating debt is something we don’t often think about. We forget that whenever we open up a new loan account (a credit card, an auto loan, personal loan) we are adding an additional bill to our monthly list of bills, and just like having too many kids, we often forget to take care of one and end up missing a payment.

This is where the magic of consolidating debt comes in. Consolidating debt is basically taking those 2 bank credit card payments, 1 personal loan payment, 1 Macy's credit card payment, and 1 Amazon payment, never ending, credit card payment and combing those bills into 1 Sun Community payment and 1 Amazon credit card payment. Doesn't this sound better already? - But wait, there's more!

Let’s do some math!

Not everyone is good at math, so we've come up with a universal rule for debt which is - Less is always better. This is contrary to our universal rule of assets which is – More is always better. These rules apply whenever we talk about interest rates. So the next time you are thinking about applying for a loan, always ask yourself: Is this the lowest interest rate I could get?

Question: Do you know the current interest rates on your loans?

If you don’t, now is a good time to ask your credit card provider for that information. Most loans that are not from Sun tend to have a higher interest rate, which means that you'll be paying more cash to the institution (Macy's, Amazon) that lent you money. Why is this happening? Well frankly, it is because we are the best local credit union (we'll touch on this subject on a later blog)!

For example: if you have a credit card with a balance of $1000 and an interest rate of 25% APR (annual percentage rate) (which is typical), you’ll be paying $20.83 only in interest at the end of the month. This means that if you pay $50, only $29.17 will go into paying off those $1000. Just by dropping the interest rate you will be able to save money or pay off that loan faster.

Sun’s personal loan interest rates start at 9.98% APR which is less than half of the competition, so now you do the math!

Watch out! Do not slip!

When consolidating debt, you will realize that all your credit cards will have a zero balance. This is good but that is not the issue. The issue is that you will soon get the urge to use those credit cards again – stop yourself!

The idea of consolidating debt is to get you out of a hole, so using those credit cards again will be like digging yourself a deeper hole. If you can’t resist the urge to use your cards then we recommend some plastic surgery (cutting up your plastic credit cards).

You are now on the road to financial health!

Want to learn more?
Check out more of our money-related blog posts, or our website for more on our products and services we offer. If you have any questions feel free to reach out to us on our Social Media pages, by phone: (760)337-4200, or by booking an appointment at your nearest branch: booknow.suncommunityfcu.org


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