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Bottom Line Up Front

  • Using debt wisely can help you make milestone purchases.
  • Ultimately, taking on debt can help you get ahead if you borrow with a purpose and have a repayment plan.
  • Strategic use of debt can help you buy a car, buy a home, get an education and consolidate debt.

Time to Read

5 minutes

May 5, 2022

Borrowing money can be necessary when making large milestone purchases like a home or car or paying for college. It does mean that you’ll take on debt. But using that debt wisely can help you get through times when money is tight. If you find yourself in a situation where you need to borrow money, here are some ways to manage debt wisely.

Review Your Auto Loan Rate

Are you making payments on a car loan? Reducing your payment by refinancing your auto loan could free up funds to pay down other debts. Or, it could give your budget a little breathing room. Either way, you’ll meet financial goals faster.

Refinance Your Mortgage 

Find out if you could lower your payments and save money by refinancing your mortgage to a lower interest rate or shorter term. If you have home equity built up, you may have an option for a cash-out refinance. With a cash-out refinance, you borrow money against the equity in your home. This can be an efficient way to borrow money and pay off other higher-interest-rate debts. But you also risk taking on more debt if you’re unable to repay it. Before you make a decision, take time to learn more about your options and when it makes sense to refinance.

Defer Student Loan Payments 

If you have student loans, review your student debt as part of the bigger picture. Student loan debt is often the lowest-rate loan people have, so it may be wise to focus on paying off other debts first. Contact your loan servicer to learn about payment deferral, forbearance and other flexible repayment options for your student loans.

Be Wise With Credit Cards 

Borrowing money on credit cards can provide a temporary solution when money is tight, but you don’t want to rely on credit cards to cover expenses for an extended period of time. Good credit habits, like paying on time and keeping a low balance, can help you build a positive credit history. Bad habits can cause your credit score to take a hit and stay on your credit report. Try these tips to keep credit card debt under control:

  • Compare the interest rates on your credit cards and consider applying for a low-rate option with a balance transfer credit card.
  • Keep up with minimum payments (or more) each month, if possible.
  • If you’ve had problems getting approved for credit before, you may be able to build your credit with a secured credit card. A secured card provides access to credit that’s secured by an amount you have on deposit in a savings account.

Apply for a Personal Loan 

You might consider taking out a personal loan if you need to borrow a set amount of money to pay for home repairs, medical bills or other large expenses. The rate is usually lower than a credit card and must be repaid over a set period of time. If you use a credit card, you’ll have access to revolving credit as long as the account is in good standing and will likely pay more in interest.

Consolidate Debt

If you have several credit cards and other loans, you may be able to use a debt consolidation loan to combine payments into one payment at a lower interest rate. This move helps simplify your debt. You’ll only have one payment each month instead of multiple monthly payments and due dates. Having fewer debt collectors helps with overall money management.

Avoid Payday Lenders

Payday lenders charge high rates and fees to give you an advance on your paycheck or stimulus payment. This could put you at risk of owing more money than you can repay. Payday loans cost a lot of money, and some of them are scam operations that take advantage of those going through difficult financial situations. Don’t fall into a trap of risky payday loans—instead, work with a lender from a financial institution you trust.

Talk to a Financial Counselor 

If you need help dealing with debt, seek guidance from a trusted financial professional. A financial counselor at Navy Federal Credit Union can help you create a debt management plan and refer you to debt counseling services.

Next Steps Next Steps

  1. Use our debt consolidation calculator to see how much you could save by combining your loans.
  2. There’s a lot to understand about managing debt, but you’re not alone! Navy Federal members are able to access free, personalized financial guidance, regardless of their financial situation. We offer our Financial Counselor services to help you learn to borrow money wisely and stay on top of debt.


This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.