A Guide to Personal Debt Consolidation Loans
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What Are Debt Consolidation Loans?
How Do Personal Loans for Debt Consolidation Work?
Pros and Cons of Debt Consolidation Loans
Capitalizing on Fixed Rates
Improving Your Credit Score
Potentially Low Interest Rates
Some Lenders Charge Fees
It’s Still Debt
Debt Consolidation May Not be Right for Everyone
When Can Debt Consolidation Be a Good Idea?
You’re likely a good candidate if you can consistently make timely payments. Late and missed payments could mean fees and other charges added to your loan balance. If you qualify for a lower interest rate than those on the debts you plan to consolidate, then it might be worth looking into how to get a debt consolidation loan. If you feel overwhelmed by the number of monthly payments you’re making, consolidating those debts into one new loan may lessen that mental burden and help you feel more organized.
Can Any Debt Be Consolidated?
Will Debt Consolidation Affect Your Credit Score?
Payment History. Making regular, on-time payments can positively affect your credit score and will indicate to lenders that you are a responsible, low-risk borrower. If you miss payments or consistently make late payments, your credit score could be negatively affected and lenders may see you as an irresponsible, high-risk borrower. Amounts Owed. By paying down your debt balance using a personal loan for debt consolidation — which is an installment loan, not revolving debt — you’ll be decreasing the percentage that you owe on outstanding debts. Keeping your credit utilization below 30% of your available credit is recommended.
Debt Consolidation Loan Alternatives
Getting Help Through Credit Counseling
Debt Management Vs Debt Consolidation
Debt Settlement Vs Debt Consolidation
Getting a Debt Consolidation Loan
You must be at least 18 years old. You must be a U.S. resident. Not currently in bankruptcy or foreclosure. To qualify for favorable interest rates and terms, have a credit score that’s above the mid-600s. Have a debt-to-income ratio below 45 percent.
Finding a Loan That Works for You
Organizing Your Information and Applying for Personal Loans for Debt Consolidation
Request free copies of your credit report from Equifax, Experian and TransUnion at AnnualCreditReport.com. Review your credit reports thoroughly, reporting any inaccuracies or errors to the pertinent agency. You might consider checking your credit score using a reputable company that does not charge you for the service. If your credit score is too low to qualify for favorable rates and terms, you might want to consider waiting until you can make some positive changes to your credit report before applying for a loan.
Typical Debt Consolidation Loan Interest Rates
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