Prakash Chandran (Host): Are you struggling to keep up with monthly payments on high interest debt? If you are, don't lose hope. Debt consolidation may help you lower your interest rates, streamline your payments, and get on track towards financial freedom. We're going to talk about debt consolidation today with Charles Schefer. He's the Director of Retail Sales and Service at Heritage Federal Credit Union. This is Talking Cents with Heritage. I'm your host, Prakash Chandran.

Host: Charles, thank you so much for joining us today. I really appreciate your time. Now, we've heard about this term before, but I was hoping that you could start by explaining what exactly debt consolidation is.

Charles Schefer: Yeah, absolutely. Thanks for having me. It's good to be here. There are so many different loans in the landscape, personal loans, credit cards, home equity loans, student loans, auto loans, mortgage loans. Debt consolidation is a way to combine multiple loans into a single loan. And what that ultimately does is it can lower your monthly payments, it can lower your interest rate or, if everything works out, it can do both.

Host: Yeah. I imagine that bringing all that debt together in one place is a big benefit of doing this, but could you talk at a high level about how debt consolidation helps?

Charles Schefer: Absolutely. So, here's the situation in today's world, the average person has four credit cards, two retail store cards, probably has an auto loan, probably has a mortgage, maybe a personal loan. That's a lot of different monthly payments that you have to make. And if you have, for example, equity in your mortgage, you can consolidate some of that debt to lower the number of payments that you have to make each month.

Host: So Charles, I wanted to ask, who debt consolidation was best suited for? So many of us, as you alluded to, have credit cards and automobile payments, but when should we really consider debt consolidation?

Charles Schefer: Sure. Well, take this market that we're in right now. Prices of just about everything are going up and so, every dollar counts. And so, I think something like a debt consolidation helps just about everyone when you get down to the brass tacks. Because if you can save money each month, that allows the freedom to do the things that you need to do every day.

Host: So, I know that a lot of people will be looking to lower their interest rate through this debt consolidation. Is that something that they can rely on?

Charles Schefer: Yeah. So, it's not always possible to get a lower interest rate, especially in this economic time. But definitely what we want to look at for sure is, are we saving you money? The interest rate is something that we've been able to focus on for quite some time, because interest rates were so low for so long. But at the end of the day, we have to have that extra money to put food on the table to keep day-to-day living expenses in a controllable manner. And one way is to do that would be to consolidate debt and free up money that you would have in other payments to make life better.

Host: Yeah. And I was just going to get into that analysis, actually figuring out whether this is right for you. So, I imagine Heritage can help with this. Can you talk more broadly about how Heritage helps?

Charles Schefer: Yeah, absolutely. So even calling in or coming to any of our branches, our financial service consultants can sit down with you and break down in real time what it looks like if we were to consolidate stuff, you know. And a quick example would be if you have multiple credit cards that you're paying on an auto loan, a mortgage, several things together, we can take a look at how putting that together can save you money.

Host: Now, you alluded to this before, but can you use the equity in your home to help consolidate the debt?

Charles Schefer: Absolutely. That's one of the easiest ways to do it. You know, the biggest investment someone makes in their lifetime is the purchase of their home. The equity and that is the value of your home versus what you owe on your current mortgage, that space in between is the equity that's available. Using that equity to roll in or consolidate different types of loans can actually get you to a single payment as opposed to multiple payments, which really helps month in and month out.

Host: And Charles, can you actually talk through how you use the equity in your home to help consolidate the debt? Like what is the vehicle?

Charles Schefer: Yeah. There's a couple of different routes you can go. So, when it comes to equity in your home, you can use a fixed rate home equity or you can use a HELOC, which stands for Home Equity Line of Credit. It really depends on what your situation is and what you're trying to get out of the product. Fixed rate home equity works just like it would an auto loan or a simple mortgage where you're paying a fixed amount for a fixed amount of time each month. And then, the Home Equity Line of Credit works a lot like a credit card using that equity total, and it's reusable over a period of time. So if you have projects after you get your consolidation done, you can certainly do that as well. But both are great for debt consolidation because it gets that multiple payments down to a single payment.

Host: And can you talk about just the actual process of debt consolidation? So, let's say someone is listening to this, they meet with a financial services consultant at Heritage, they determine it's right for them. How does the process work?

Charles Schefer: Yeah. So, the process is really, really simple when you get down to it. And so, I'll just give an example. We'll use the average figures that I used early on in the conversation. Say you're a person who has six total credit cards. You have an automobile, you have a mortgage. If you're just paying the minimum payments on your credit cards, that's going to take a very, very long time to pay those off. And the interest rates there average 19-24%. An automobile loan, the interest rate is average 6-10%. A mortgage interest rate right now average 4% to 7%. So if you're paying minimum payments on your credit card, you're paying an auto loan and you're paying a mortgage.

In this particular case, we'll take average numbers. You're paying $400 a month on six different credit cards. You're paying $400 on an automobile, you're paying $1,200 on a mortgage. You bring those numbers into us and we'll be able to look at how we could consolidate those into the equity of that home. And suddenly, if things work out, you could take those eight payments that are averaging $2,000 a month and get them into one payment that's about $1,500 a month, which means you're saving $500 a month in payments. And that's just an average. But imagine what could you do with $500 extra a month? I know it would change my life.

Host: Yeah, absolutely. So, I'm curious, with that decision made to go with Heritage, does Heritage handle all the debt consolidation or is that something that the customer does themselves?

Charles Schefer: That's absolutely something that we will help you with. So at the time of closing, once everything is in order and lined up and we've got everything approved and signed and ready to go, all we're going to need is the account number, the address, and we'll send the check off for you. So, we will help with that process from start to finish all the way through.

Host: Yeah. So, it seems relatively painless, right? Like you just get the account number, they don't have to worry about anything else. You take care of it for them.

Charles Schefer: Yeah. If you bring in a copy of your most current bill statement for each of the things that we're trying to work on, it's no problem at all. Couple of phone calls, a few minutes of your time. And if we can get everything approved, then it's nice and easy.

Host: You know, there's going to be people listening to this that maybe are suffering with a lot of different loans, they have some debt, and they're paying that minimum amount of interest. If there's one thing that you've learned in working with all of your customers, what would you want to leave our audience with?

Charles Schefer: Don't focus on the problem. Let's focus on the solution. And the best way to be able to do that is to come in and sit down to talk to somebody who's an expert, who can walk you through the whole process. And when you have an open conversation with an expert, you're able to see things in a different way that you may not have seen before. And ultimately, in the case of what we're talking about here today, it could save you a lot of money.

Host: Well, Charles, I think that's the perfect place to end. Thank you so much for your time today.

Charles Schefer: Thank you.

Host: That was Charles Schefer, Director of Retail Sales and Service at Heritage Federal Credit Union. For more information, you can visit heritagefederal.org/heloc. If you found this podcast to be helpful, please share it on your social channels, and be sure to check out the entire podcast library for topics of interest to you.

Thanks for listening to Talking Cents With Heritage. My name's Prakash Chandran. Stay well.

Loans may be subject to credit review and approval, and property insurance may be required. Membership restrictions may apply. The views and opinions expressed in this podcast are those of the speakers and do not necessarily reflect the views or positions of Heritage Federal Credit Union.