5 Ways To Manage Debt With Help From Your Bank
Written by
Kellan Jansen
Edited by
Amber Barkley
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According to late 2023 data from the Federal Reserve Bank of St. Louis, more Americans are struggling financially than ever. Credit card debt is particularly severe, having reached levels not seen since the Great Recession.
If you’re experiencing these problems, too, your bank may be able to help. Here are five examples of how you can get support with debt from your financial institution.
Get Financial Advice From Experts
The World Economic Forum reported that 50% of Americans are financially illiterate. This means they don’t understand the intricacies of saving, managing and investing money.
Banks are uniquely positioned to help these people, since 81% of U.S. adults have a bank account. Financial experts at your bank will gladly walk you through any debt-based decision you’re struggling with — from applying for a mortgage to paying for college.
This makes it easy to get thoughtful financial advice with a personalized touch. Taking advantage of the service could help you make more informed decisions about many different financial situations.
Access Free Tools and Resources
Banks often provide their customers with free financial resources like planning tools and calculators. You can use these to get on-demand support as you plan for your financial future.
For example, you may have a large debt you want to pay off but need to make room in your budget before doing so. Your bank’s budgeting app could be a huge help. It would help you organize your thinking and track progress over time.
Financial calculators can also be helpful — especially when you have debt. Your bank may have a variety of these on its website. They just make it easier to calculate things like when you’ll finish paying off a debt or how much you’ll pay in interest.
That way, you don’t have to do the work yourself, and you have more time for other things. Plus, you’ll feel better knowing your financial goal is being built atop a solid mathematical foundation.
Consider Loan Consolidation
A bank can also help you consolidate your debt. This means taking out a new loan to repay your existing ones. That way, you only have one debt bill to worry about instead of several.
But loan consolidation isn’t just a way to simplify your life — it could also save you money. To understand why, consider the interest rates of your various debts. Some are probably higher than others.
For example, the average credit card interest rate is over 27%, but the average rate for a used car loan is under 12%. This means you pay more to borrow money through your credit card than when purchasing a car.
A loan consolidation takes all of your interest rates from all of your debt and simplifies them to a single number. That new interest rate should result in your paying less to borrow the total amount of debt you have. But make sure you do the math — if you won’t be paying less in interest overall after you consolidate, there’s little reason to take that step.
Organize Your Financial Life
When you have a lot of debt, just figuring out how to start making progress can be challenging. Banks can help with this, too. They may not tell you exactly how to approach repaying your debts. But they can organize your finances so that you feel more confident about working toward your goal.
For example, a bank can help you set up a new account so that you have a clean slate to start your work. Your institution could also help you set up savings and retirement accounts or give you some basic guidelines for investing.
Having the right financial structure in your life is an important part of managing debt. When your money is all pooled together in a single place, it’s easier to spend your surplus on things you don’t really need.
Find Loans and Credit Cards With Reasonable Terms
Finally, although your bank won’t always offer the best terms on loans and credit, they do tend to be reasonable — at least compared to the alternatives. For example, the average annual interest rate for payday loans is 372%. You can usually borrow money from your bank for less than that.
That’s not to say you should definitely borrow more money to repay your debt. But that can be a reasonable decision, especially when your debt has a high interest rate. Just think back to the example of loan consolidation.
So, if you need to borrow money to start solving your debt problem, banks are a great resource. They’ll also usually provide you with better support than online-based options.
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