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If you’re new to the world of loans and banking, then you may have stumbled upon the term debt consolidation loans and have felt confused. This article will give you a crash course on what debt consolidation loans are and the real truth behind this strategy.
What are debt consolidation loans?
In layman’s terms, what a debt consolidation loan does is it merged multiple loans into one payment scheme, hence the term consolidation. It merges existing loans of yours that come with high interest rates and gives you not just new but better terms and conditions. Typically, the rate is fixed and you make the payments monthly over a given time period.
Is getting a debt consolidation a good idea?
Debt consolidation loans are mostly widely available to individuals or borrowers with excellent credit score. They can usually qualify for a consolidation loan that comes with very low interest rates.
Taking this option is also a good one if your loans are mostly credit card bills. Instead of paying the minimum balance and always ending up having to pay the compounding interest costs from your previous balances, you can just have a loan that has a set time frame. As long as you make the payments regularly and on time, you won’t just be saved from interest costs but also from extending your loan term.
Is getting a debt consolidation a bad idea?
The debt consolidation loan may not be a good idea after all if your loan is extremely huge. Your total debt costs must not be over 40% of your annual gross income. This option is most definitely not the option for you if your debts has already gone past 50% of your income.
Moreover, the same also goes if your debt is small. If the debt can be paid in just about a year, then you may no longer need to avail a debt consolidation loan.
How to Get a Consolidation Loan?
Normally, when you have bad credit, you also have a lot of debts and these two things don’t really go together. So if you’re planning it, we’re here to help you!
In this post, we’ll talk about how borrowers with bad credit remark can manage all their debts using bill consolidation loans.
As the name suggests, this loan is intended for consolidating debts, like personal loans, credit card debts, mortgage, etc. It’s a practical way of handling all your accounts by combining it into one single loan. This will help you pay the loan easier because usually, the interest rate it charges is lower compared to your outstanding accounts. In addition, it will be more convenient because you don’t have to deal with various lenders anymore, instead, you will be paying to one loan provider.
However, if you have a poor credit remark, this might not be the case. While you can still have the loan, you will not be offered with the best terms simply because the debt consolidation lender will see you as a risk. But still, you can shop around and look for better options because there are a few loan providers who are willing to take your special case.
Best Alternatives For Debt Consolidation Loans For Bad Credit
When you have a bad credit history, it’s usual for a lender to charge you with sky-high interest rates. However, they are not the only options you have when looking for a debt consolidation loan when you have bad credit.
For one, you can talk to your local credit union and ask if they can offer this type of loan. Compared to banks and traditional lenders, these non-profit organizations are owned by their members, thus they have better terms. You can also opt for online lenders, who, by the way, are more lenient with their requirements. Although they will still conduct credit checking, they will not use your credit score to come out with their decision. In addition, you can get the funds in the soonest possible time.
Best Cosolidation Loan Companies
A lot of people are searching for the best lenders that could offer them the best deals that will suit their budget. If you have debts and struggling to manage each of them then you’ll need a debt consolidation loan.
A debt consolidation loan is a type of loan where in your debts will combined into one simple monthly payment with lower interest than you could pay for each of your debts. So if you have plans in getting a debt consolidation loan might as well pick the right lender. When looking the right loan for you, you need to consider some of these; the interest rates, origination fees, early payoff fees, and minimum credit scores that the lender will require. So here are some of the banks that offers great deals for debt consolidation loan:
Marcus by Goldman Sachs
• This lender offers a minimum credit score of 660 for a new loan and doesn't charge late fees but of course you still have to pay them on time. The interest rates range from 6.99% to 24.99% APR. Marcus don’t charge origination or prepayment fees which is mostly present to other lender’s requirement.
One Main Financial
• One main financial don’t require a minimum credit score that’s why this is a good option for some borrowers with bad credit score. The interest rates range from 16.05% to 35.99% which you may find higher than other lenders but if you have a bad credit then this could be the best option you could have. This lender also offers secured loans where in you’ll put up something for collateral if ever you can’t pay the interest any more.
• Lending club offers loans from $1,000-$40,000 with interest rates that range from 6.95% to 35.89% APR and charge origination fees that range from 1% to 6% depending on your credit. They require borrowers to have a minimum of 600 credit score or higher.
How To Apply?
Applying for an unsecured loan is so easy. All you need to do is to select a loan of your choice. Provide your information in an online form provided on the lender’s website. Once you have completed all the necessary steps, just wait for a confirmation for your approval. It will only take a few minutes to get the results. Once it is in, you can get your money directly deposited to your account.
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