Are you looking for ways to save in the new year? You’ve probably already considered common moves like cutting out some subscriptions or committing to dining out less. But let’s face it: your loan payments likely make up the bulk of your budget’s expenses. Between credit cards, car payments, student loans, mortgage bills, and more, it may seem like most of your money is going to loan payments, leaving less and less to cover your other needs.
While loan payments might make up the bulk of your monthly expenses, the good news is that they also provide the most significant opportunities to save. You can unlock these savings through a simple process called a Loan Review, and the end of the year is the perfect time.
What is a Loan Review?
A loan review is a process where our lending team will review all your outstanding loan balances. Together, we’ll look for opportunities to secure lower interest rates, improve loan terms, and consolidate debt.
By switching loans to the credit union or combining loan balances in a new loan, you can substantially reduce your monthly loan payments, and the total amount of interest paid over the life of your loans.
How Does a Loan Review Benefit Me?
When you borrow money through loans or credit cards, each has unique interest rates and terms. If you have several loans, you can often combine or rework these loans to save money and better match your budget. Some of the most common goals include:
- Secure Lower Loan Rates: There are many opportunities to reduce loan payments by locking in lower interest rates. For example, rates may have decreased since you initially opened your loan, or your credit score may have improved since then. If you have loans at other institutions, switching them to the credit union might also unlock lower rates and substantial monthly savings.
- Lock in Favorable Terms: You might be able to extend your loan terms by refinancing. This tactic will lower your monthly payments immediately. Or you can consolidate debt into a longer-term loan to free up additional funds monthly.
- Simplify Debt Management: If you’re juggling multiple loan and credit card due dates monthly, consolidating debt into a single loan could streamline the process – while saving money in interest at the same time.
How Does a Loan Review Work?
While the concept of a loan review sounds complex and time-consuming, the process is quite simple. Here’s a glimpse of how the process works:
- Gather Your Loan Documents: Obtain a copy of all your outstanding loan and credit card account statements. Your statements will list the current interest rate, due date, and terms. Every loan is an opportunity to save money, so include statements for:
- Vehicle Loans
- Personal Loans
- Credit Cards
- Home Loans: Mortgage & Home Equity
- Payday Lender Loans
- Buy Now, Pay Later Payments
- Student Loans
- Any other loans or lines of credit
- Schedule an Appointment: Contact the credit union and schedule an appointment to meet with a member of our lending team.
- We’ll Help You Save: Our knowledgeable and helpful lending team will review your outstanding loans and credit cards with you – identifying opportunities to help you save money, simplify debt management, and obtain more favorable terms to match your monthly budget. We’ll do all the heavy lifting so you can start the new year off with more money in your pocket – it’s that easy!
How Can a Loan Review Help Me Save Money?
You will be surprised by the magic our lending team can perform to help you save money. One of the best ways to illustrate how the savings add up is to review a couple of examples.
Example #1:
Assume you have a car loan that you originally financed with a dealership three years ago with the following details:
Loan Amount: | Interest Rate: | Loan Term: | Monthly Payment: |
$45,000 | 9.0% APR | 72 Months | $811.15 |
After three years, your current balance will be $25,508.05.
Now, assume you decide to refinance that loan with the credit union. To lower your monthly payment more, you extend the remaining 3-year term by 6 months to 42 months total. And you lock in a lower rate at 6% APR.
New Loan Amount: | Interest Rate: | Loan Term: | Monthly Payment: |
$25,508.05 | 6.0% APR | 42 Months | $674.85 |
Instantly, your monthly loan payment will drop by $136.30 to $674.85. That’s an extra $136.30 in your pocket each month to put toward groceries or other expenses! Plus, by refinancing, you save an additional $857.82 in interest over the life of the loan.
Example #2:
Assume that in addition to your car loan, you also have three outstanding credit cards – each with different interest rates. You pay $250 toward each card balance monthly and do not add more to any card:
Credit Card: | Current Balance: | Interest Rate: | Payoff: | Interest Paid: |
Card A | $5,000 | 21% APR | 25 Months | $1,208 |
Card B | $2,500 | 19% APR | 11 Months | $243 |
Card C | $4,500 | 24% APR | 23 Months | $1,134 |
Your total outstanding balance is $12,000. If you continued to pay $250 monthly on each card, it would take up to 25 months until you are debt-free, and you would have paid $2,585 in total interest.
Now, assume you consolidate all these balances into a debt consolidation loan with a term of 18 months at 9% APR.
Debt Cons. Loan: | Current Balance: | Interest Rate: | Payoff: | Interest Paid: |
New Loan | $12,000 | 9% APR | 18 Months | $873.10 |
With a debt consolidation loan, you will become debt-free seven months sooner, plus you will save $1,711.90 in interest over the life of the loan. Your monthly payment will also decline from $750 to $715.17 – putting extra cash in your pocket.
If you extend the term beyond 18 months, your monthly payment will decrease even more. It’s entirely up to you how aggressive you want to be with the time frame when consolidating debt.
We’re Here to Help!
Most people tend to overlook their loans when looking for ways to save money. However, it makes sense that your most expensive monthly bills will also provide the greatest opportunities to save money.
If you’re looking to start the new year off on the right financial track, consider a year-end loan review. It’s a quick and simple process that could instantly put more money in your pocket and save substantially in interest over the life of your loans.
Schedule your year-end loan review by visiting any of our convenient branch locations or call 800-782-4899 today!
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.