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      For Your Life January 28, 2025

      Overwhelmed by Debt? Here’s How to Take Control of Your Finances

      Years of economic disruption and higher-than-average inflation have impacted many Americans’ budgets. And if you’ve found yourself struggling to manage your debt, you’re not alone.

      While debt is common, it can be avoided — and you have practical options to reduce your debt and achieve financial freedom. Here, we’ll discuss tips and strategies to help you pay down debt and take better control of your finances.   

      The challenge of managing multiple debts

      Paying off debt sounds simple: Pay more than you spend, and you'll eventually pay it down. But in practice, that plan comes with several challenges.

      If you have multiple credit accounts, you'll need to balance multiple payments and due dates. That may increase the risk of missing a minimum payment or falling behind on your repayment plan. 

      Carrying multiple high-interest debts is also expensive. The higher the interest rate, the more of your payment goes to paying interest, which makes take longer to pay down. 

      Debt consolidation helps make it easier to reach your goals

      If juggling multiple debts isn’t working, there’s a simpler option that may be available to you: Consolidating your debt.

      Debt consolidation allows you to merge the balance from multiple debts into a single account, so you can pay down your debt with one monthly payment. Most of the time, consumers opt to consolidate their debt onto a lower-interest account, allowing them to save money on interest as they work toward their goals.

      What are the advantages of debt consolidation?

      There are three key benefits to consolidating your debt.

      1. Streamlined financial management

      Pay down your debt with one monthly payment, rather than managing multiple payments and due dates.

      2. Save money on interest

      Consolidating your debt onto a lower-rate credit account means more of each payment goes to paying the principal (the amount you owe), rather than going to interest

      3. More flexibility with debt repayment

      You'll also have more flexibility for how to pay down your debt. With less money going to interest, you may have wiggle room to either reduce your monthly payment without falling behind on your plan, or keep making the same payment to pay down your debt faster. 

      Types of debt consolidation

      Most people use one of two financial tools to help with debt consolidation: A loan or a home equity line of credit (HELOC).1 

      Debt consolidation with a loan

      One easy way to consolidate your debt is with a personal loan1. Simply use the lump sum payment from the loan to pay off your existing debts, then repay the loan via regular payments. 

      Advantage of using a loan for debt consolidation:

      • Accessibility: Personal loans are accessible for many consumers, and a balance transfer credit card may be easier to obtain than other types of credit.

      Consideration for using a credit card for debt consolidation

      • Moderate interest rates: Personal loans often come with higher interest rates than some other forms of credit, so they may not be the most cost-effective option for everyone. 

      Debt consolidation with a HELOC

      If you've built equity in your home, your home equity can help you pay down your debt. 

      With a HELOC, you’ll have the option to borrow against the home's equity to pay off your existing debts, making interest-only payments on the amount you borrow. After a set period of time, usually 10-15 years, the balance on the HELOC converts to a loan that you pay back with regular payments.

      At Old National Bank, we offer line amounts from $10,000 to $1,000,000 to suit a range of goals, and offer introductory rate discounts for the first six billing cycles to help accelerate your debt repayment.

      • Use our HELOC calculators to learn how much you could borrow and estimate your monthly payment.

      Advantages of using a HELOC for debt consolidation:

      • Lower interest rates: With a HELOC, you can usually access credit at a lower rate than you would with a personal loan.

      • Flexibility: Homeowners often have the option to use, pay down and reuse their HELOC over several years, so it can help you reach multiple goals.

      Considerations for using a HELOC for debt consolidation:

      • Borrowing against your home: Deviating from the terms of the line of credit may put your home at risk. While this situation is rare, it’s important to understand the terms of the HELOC and how to use it effectively. 

      • Less month-to-month accountability: With a HELOC, you're only required to make interest-only payments for the first several years. That means you'll need self-motivated discipline to stay on track.  

      Create a debt payoff strategy that works for you

      No matter which path you choose, these three strategies can help you make it work for you

      1. Read the fine print

      Take the time to fully understand each option and how it may impact your financial health. If you’re planning to get a personal loan or HELOC, make sure you understand:

      • The terms of the account: How much you’ll need to repay, and when. 

      • The total cost of borrowing: The overall interest and fees for the account (e.g. loan origination fees, interest costs over the lifetime of the loan).

      2. Build debt repayment into your budget

      Debt consolidation doubles as an opportunity to revisit your budget and find a financial plan that will be sustainable for you. Build your debt payments into your budget, and select a tool — like a budgeting app or spreadsheet — to keep tabs on your progress.

      3. Get support on your journey

      An Old National Banker can make the difference between feeling lost during debt repayment and meeting your goals with confidence. Consider reaching out to a professional for help understanding your options and keeping your plan on track.

      When you’re ready, we’re here to help

      Our team of financial experts is ready to answer your questions, help you devise a financial plan, and connect you with the resources you need to live debt-free.

      Locate a branch near you to begin your journey. 

       

      1 All loans are subject to credit review and approval. Property insurance required for all loans secured by real estate. Rates are subject to change daily. Contact your Old National Banker or Residential Lender for current loan rates. NMLS #459308. 

      2 Calculators are provided for estimated analysis only. Results are not indicative of any actual loan terms or payment amounts.

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