Debt consolidation is a great way to pay off your debt without worrying about catching up with all of your payments. It works as combining your multiple debts into a larger one to pay off in full. This can be a very favorable thing to do as it almost works as a balance transfer.
You can take a debt consolidation loan for most debt such as student loans, credit card debt, and other liabilities. Generally, the debt consolidation loans have better payoff terms in both the interest rate and length. Especially if you’re behind on your payments and paying a late fee. Besides, debt consolidation loans have one of the lowest interest rates. Check the calculator down below to see the figures for the interest rate the lender offers to you.
The debt consolidation you take will not erase your existing debt. Instead, it will transfer your loan to a different type of loan or lender. This may increase your cash flow as well if the debt consolidation loan you’re getting has a longer time period to pay off.
Where and How to Get a Debt Consolidation Loan
If you have a loan or credit card debt, it is always going to be easier to get it from the same company. Whether you owe to a credit card company, credit union, or a bank, your chances of getting approval is greater if it is the same company.
If you get rejected though, you can try different lenders but your first option should always be the company you already owe.
What types of debt consolidation are there?
Just like credit cards, there are two types of debt consolidation loans; unsecured and secured. Unsecured loans are not backed by any assets. Therefore, this type of debt consolidation loan tends to have a higher interest rate than secured loans.
The secured debt consolidation loans are backed by your assets. It can be your house, car and such but typically have a lower interest rate than unsecured loans. Nevertheless, regardless of your interest rate, it is going to be fixed, meaning that it will not vary over time.
Debt Consolidation Loan Interest Rates
The debt consolidation loan rates usually vary depending on your credit and the size of the loan. But it’s still going to be way less than most credit card interest rates even though the APR can be as high as 35%. Typically, the interest rate for a debt consolidation loan can range between 6% to 19%. Again, the size of your loan, credit score, payoff term, etc.
Use this debt consolidation loan calculator to find out if you are better off with it or not.