best place to get a debt consolidation loan

best place to get a debt consolidation loan

Debt consolidation means taking out a new loan to pay off a number of liabilities and consumer debts, generally unsecured ones. In effect, multiple debts are combined into a single, larger piece of debt, usually with more favorable pay-off terms: a lower interest rate, lower monthly payment or both. Consumers can use debt consolidation as a tool to deal with student loan debt, credit card debt and other types of debt.

There are several ways consumers can lump debts into a single payment. One is to consolidate all their credit card payments onto one new credit card – which can be a good idea if the card charges little or no interest for a period of time – or utilize an existing credit card's balance transfer feature (especially if it's offering a special promotion on the transaction). Home equity loans or home equity lines of credit are another form of consolidation sought by some people, as the interest on this type of loan is deductible for borrowers taxpayers who itemize their deductions. There are also several consolidation options available from the federal government for those with student loans.

BREAKING DOWN 'Debt Consolidation'

Theoretically, debt consolidation is any use of one form of financing to pay off other debts. However, there are specific instruments called debt consolidation loans, offered by creditors as part of a plan to borrowers who have difficulty managing the number or size of their outstanding debts. Creditors are willing to do this for several reasons – one of them being that it maximizes the likelihood of collecting from a debtor. These loans are usually offered by financial institutions, such as banks and credit unions; there are also specialized debt-consolidation service companies.

There are two broad types of debt consolidation loans: secured and unsecured. Secured loans are backed by an asset of the borrower’s, such as a house or a car, that works as collateral for the loan. More traditional, unsecured debt consolidation loans, which are not backed by assets, can be more difficult to obtain. They also tend to have higher interest rates and lower qualifying amounts. Even so, the interest rates are still typically less than the rates on credit cards. Also, the interest rate is fixed.

“Typically, the loan has to be paid off in three to five years,” says Harrine Freeman, CEO and owner of H.E. Freeman Enterprises, a credit repair and credit-counseling service in Bethesda, Md., and author of “How to Get Out of Debt.”

These types of loans don’t erase the debt; they simply transfer all your debts to a different lender or type of loan. (In circumstances where you need actual debt relief or don't qualify for loans, it may be best to look into a debt settlement rather than, or in conjunction with, a debt consolidation. Debt settlement aims to reduce your obligations rather than just reducing the number of creditors. Individuals usually work with a debt-relief organization or credit-counseling service. These organizations do not make actual loans; instead, they try to renegotiate the borrower’s current debts with creditors.)

Advantages of Debt Consolidation Loans

Freeman says that debt consolidation loans are most helpful for those who have multiple debts, owe $10,000 or more, are receiving frequent calls or letters from collection agencies, have accounts with high interest rates or monthly payments, are having difficulty making payments or are unable to negotiate lower interest rates on loans. Once in place, a debt consolidation plan will stop the collection agencies from calling (assuming the loans they're calling about have been paid off).

There may be a tax break, too. The Internal Revenue Service (IRS) does not allow you to deduct interest on any unsecured debt consolidation loans. If your consolidation loan is secured with an asset, however, you may qualify for a tax deduction. Debt consolidation loan interest payments are most often tax deductible when home equity is involved.

A consolidation loan may also be kind to your credit score down the road. “If the principal is paid down faster [than it would have been without the loan], the balance is paid off sooner, which helps to boost your credit score,” says Freeman.

For example, say an individual with three credit cards and a total of $20,000 owing at a 22.99% annual rate compounded monthly needs to pay $1047.37 a month for 24 months to bring the balances to zero. This works out to $5136.88 being paid in interest alone. If the same individual were to consolidate those credit cards into a lower-interest loan at an 11% annual rate compounded monthly, he or she would need to pay $932.16 a month for 24 months to bring the balance to zero. This works out to $2,371.84 being paid in interest. The monthly savings is $115.21, and over the life of the loan the amount of savings is $2,765.04.

Even if the monthly payment stays the same, you can still come out ahead by streamlining your loans. Say that you currently have three credit cards that charge a 28% APR; they are maxed out at $5,000 each and you're spending $250 a month on each card's minimum payment. If you were to pay off each credit card separately, you would be spending $750 per month for 28 months and you would end up paying a total of around $5,441.73 in interest. However, if you transfer the balances of those three cards into one consolidated loan at a more reasonable 12% interest rate and you continue to repay the loan with the same $750 a month, you'll pay roughly one-third of the interest ($1,820.22), and you will be able to retire your loan five months earlier. This amounts to a total savings of $7,371.52 ($3,750 for payments and $3,621.52 in interest).

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Best Place to Get Debt Consolidation Loan

Trying to get a loan (10-15k) for debt consolidation. Credit for my wife and I are in the 650-700 range. Any suggestions would be greatly appreciated.

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Re: Best Place to Get Debt Consolidation Loan

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Best place to get a debt consolidation loan

Florida Debt Consolidation Loan - If you live in one of the major cities of Florida, you shouldn’t have any trouble getting a Florida debt consolidation loan. Like the rest of the country, most of the debt consolidation loan centres in Florida are based around the larger cities. Therefore, people who live in any of those cities should be able to find a debt consolidation company just by looking through their local phone book.

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Debt Consolidation Loans up to $100,000

Debt Consolidation Loans up to $100,000

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Options for Debt Consolidation

You have several options when it comes Debt Consolidation. Make sure you know which one is perfect for you.

Knowing the right things to consider when finding the right Debt Consolidation Lender is important.

We have some helpful reminders for those who are considering debt consolidation.

We’re providing you with the steps you need to take in order to start the Debt Consolidation process.

Choosing the Best Debt Consolidation Loans

To create the best list of Debt Consolidation partners for you, we’ve taken the following factors into account:

Before anything else, you first need to need to know if you qualify for the loan. Most lenders have a minimum FICO score – this represents their risk appetite. Even if you find what you believe to be the best company to get a debt consolidation loan from, you will have to look for other options if you do not meet their requirements. Therefore, if you have a relatively low FICO score, be realistic and expect higher APRs. On the other end, if you have an excellent FICO score, your options will be a lot broader.

Annual percentage rates (APR) and monthly payments

If you are looking at estimated APR and monthly payments, you should already have narrowed down the list of potential lenders on where you qualify. Of course, you want to get the best deal out there. However, understand that this is limited by certain factors, largely by your FICO score. What you will have now is a range of your potential interest rates you can accrue based on the information you gathered. Assuming you have the same loan term, the higher the interest rate is, the higher your monthly payments will be.

Aside from interest, lending institutions earn money through various fees. There are different types of fees that a lender can impose on clients, but the most common one is a prepayment fee. Your best debt consolidation loans will not come with fees unless they are very minimal. Know the fees associated with your loan. Otherwise you might be surprised when your bill comes.

If your credit rating is impeccable and you have found the perfect debt consolidation loan, you may find their payment process is indirect and very democratic. Is this still a viable option? You should always consider the accessibility and convenience of your lender. There are other concerns in your life besides settling your debt. If your chosen debt consolidation loan becomes a burden instead of making your life easier, you are better off with another creditor.

Lastly, assuming that you are no expert when it comes to how these things are handled, there must be qualified and competent customer representatives to bridge the knowledge gap for you. Even if you feel you are comfortable with a lender, you still must be certain that your concerns are addressed accurately in a timely manner. Especially when it comes to fees, there must be clear communication between the two parties. Without that, you might unknowingly hold wrong expectations and get very frustrated later on.

The decision must not be on your financial concerns alone. In the end, the loan is just as good as where you source it. Your choice must be a balance of all these factors, with some factors weighing more heavily than the others depending on your priorities.

Debt Consolidation with Personal Loans

Many individuals accumulate debt with various organizations. This can include things like student loans, credit cards, business loans, mortgages, and many other lending products.

One of the best ways to simplify this complex web of bills is with a debt consolidation loan. A debt consolidation loan is when you are given a loan to pay off other debts. The result is that your bills are consolidated into one place so you don’t have to worry about tracking multiple different payments.

You pay a fixed payment to your lender for a period of two to five years on average. Most consolidation loans are offered at a fixed interest rate, which gives borrowers the stability and predictability they might lack in their current financial arrangements.

Are you a good candidate for Debt Consolidation?

You might be a good candidate for a debt consolidation loan if:

  • You can repay your consolidation loan without accruing additional debt.
  • You have the right credit to obtain a loan at a better interest rate than your current debt.
  • You are having a hard time keeping up with multiple different payment schedules.

However, as with all financial products, there are a few things you should pay attention to:

  • Make sure you are aware of the fee the consolidation lender will charge
  • Understand what support you have access to, for example: will the lender pay your creditors directly?
  • Check if there is an advantage to having a co-signer on your loan.

Consolidation Options: Loans vs. Credit Cards

With the right credit, you can get a card that has an introductory 0% interest period. Transferring your current balances to this new card can save you money.

Something to consider, though, is that the introductory rate will eventually expire. If you haven’t paid off the balance by that point you could be in for a surprise when the bill comes due. The interest rate on credit cards is almost always higher than the interest rate on a personal loan, so if something comes up and you can’t pay off the balance on time you’ll face a large expense.

There are some distinct advantages to personal loans when compared to credit cards for debt consolidation.

The first advantages have to do with the structure of a personal loan. The fixed payments provide predictability on when you will be done paying your loan, and the interest rates are usually much lower for personal debt consolidation loans than they are for credit cards. In fact, because loans are issued through the banks, there are limits on how high of an interest rate they can have. For example, federal credit unions are typically limited to 18% per annum.

Another advantage is the way that the debt is treated on your credit report. Credit cards appear as something called revolving debt, which has a greater impact on your score than installment debt, which is how a loan is categorized. This has to do with the fact that credit cards have a credit limit, and using too much of your credit limit can negatively impact your score. These factors don’t apply to installment credit.

There are a number of ways that you can get personal debt consolidation loan, but one of the most common is to use online services to compare different lenders. Each lender has different policies and procedures, so it is important to understand how to compare different personal debt consolidation loan lenders.

Best place to get a debt consolidation loan

Disclaimer: Some of the links on this site are affiliate links for which we get compensated.

What You Need To Know About Debt Consolidation

A Top Rated Credit Card Consolidation Program Can Be A Lifesaver When You Are Drowning In Debt

Money management and the subsequent debt that everyone incurs can be daunting to some people and in some cases leads to conditions beyond and accordingly shows the need for assistance in managing that debt. The resources are available. Individuals just need to find the best credit card debt consolidation plan for their situation. Everyone has debt. Some people manage it very well. Others will need some assistance. There are several ways of reducing and paying off excessive debt.

Being in debt is not always a bad thing. Purchasing a house, buying or leasing a car, borrowing money to pay for and your children's college educations are all debts. However, when debt is managed properly, you simply have to keep the amount you own within your ability to pay.

Many people find themselves in debt, because they overextended, unexpectedly lost their job had a major family crisis or your entire 401k and other investments tanked, and the prospect of the value returning to its prior level is not too good.

Other people go in debt because they over-extended the use of credit cards, the small savings at the bank and poor management. Most people do not intend to go into debt. Some people have more than their share of misfortunes, ranging from the home value increasing, leading to higher property taxes. The car breaks down, and it needs a new engine. There are always unexpected expenses that everyone should anticipate when they make a major purchase.

How to manage your debt will depend on whether you have maintained a good credit and do not wait too long to act, or if you have a poor credit rating resulting from overspending, unexpected expenditures and other items.

If your credit score is good, your situation may be handled through a low-interest debt consolidation loan. This can be handled through the use of peer-to-peer lenders such as Prosper Loans or Lending Club.

Should you have a poor credit rating; you will need to seek the services of National Debt Relief. In this case, steps may be taken to negotiate better interest rates on credit cards and other steps that would reduce your debt and make it more manageable.

Do Not Delay in Seeking Help

One basic thing to remember is not to delay seeking help. If you are only paying interest on credit cards, nearly exhausted your savings and considering borrowing against your 401K account or other pension plan, then it is time to take action.

When considering debt consolidation you are taking out one loan to pay all the outstanding bills and perhaps have some left over for emergences. The following link will show the difference between Prosper and Lending Club. The final rate you receive on your debt consolidation loan will depend on your income, your credit history and the type of debt you have, which can range from the excessive use of your credit cards, or being hit with a higher mortgage payment because the low variable-rate mortgage you secured several years earlier has increased to a burdensome level.

Using either of these companies should not hurt your credit score and may actually improve it, especially through the paying off of credit card debt.

Both companies have similar procedures for borrowing money, but there are differences in determining qualifications, rates and other issues. Therefore, if pursuing a debt consolidation loan, check out both sites, learn how they determine credit scores, duration of the loan and other factors. Then choose the one that seems best for you.

Regardless of which company you chose to help manage your debt, it is important to check out both web sites. Either site may look appealing, but comparing the two sites will help determine what is best for you.

Examples of Monthly Payments to Reduce Debt Using Lending Club

The following examples assume a three-year pay out with an interest rate of 7 percent.

$5,000 -- $154.39 $557.88

$10,000 -- $308.77 $1,115.75

$20,000 -- $617.54 $2,231.51

$30.000 -- $926.13 $3,347.26

Prosper does not provide the same type of calculator on its website as Lending Club. However, by going over the site, the borrower can enter various amounts and terms and provide some basic information, such as name, email, etc. and then receive the interest rate. According to the website Prosper offers a lower interest rate. The 7.0% APR example used above is for demonstration purposes. Interest rates will be determined by your current situation, the amount of debt and other factors.

If your credit rating is still good, using one of the above-mentioned companies would be the best choice. Your debt will be consolidated and a sum of money to meet that obligation will be loaned you to pay down the debt. After that the client will pay back, over a number of years, the loan that was made. The length of the term of the loan will be based on the amount of debt. The interest rate will be driven in part by standard rate tables, but these services will probably charge more than a bank loan.

Peer-to-Peer Differs From Traditional Lenders

Lending Club and Prosper are identified as peer-to-peer (P2P) and are different than traditional lenders. The major differences are that P2P lending sites are supported by private investors instead of financial institutions such as banks. Furthermore, P2P lenders will frequently offer lower rates than other lenders.

However, like mortgage lenders and credit-card companies, the greater risk you take as a borrower because of your credit status, the higher your APR. Depending on your credit score and documentation, you can receive your loan in as little as one business day versus a longer wait with traditional loans. Most P2P loans will have various fees associated with in including an origination fee, late-payment fee and failed payment fee.

Originally, P2P lenders were not federally regulated. That has changed. The P2P lenders are now obligated to register with the Securities and Exchange Commission (SEC). In addition to the federal oversight, each state has regulations regarding Peer-to-Peer operations. Therefore it is important to check the appropriate regulations to determine the impact.

Solutions Available for People With Poor Credit History

Sometimes people will not be concerned with proper management. Credit cards are offered with a beginning low interest rate that may increase significantly in three to six months. Accordingly, the higher interest rates make it harder to pay more than interest each month.

In cases such as this, the services of National Debt Relief may be your best solution. This method can help reduce your debt, avoid bankruptcy and help you to improve your credit score.

National Debt Relief will negotiate with the companies that you owe money to and seek a lower balance that has to be paid.

The company works to reduce the amount of unsecured debt you may have. These debts include:

  • Credit Cards
  • Personal Loans and Lines of Credit
  • Medical Bills
  • Collections and Repossessions
  • Business Debts
  • Certain Student debts

However, there are some debts that National Debt Relief cannot negotiate to a lower amount. These include

  • Lawsuits Settlements
  • IRS Debt and Back Taxes
  • Utility Bills
  • Auto Loans
  • Government Loans
  • Mortgage and Home Loans
  • Other Secure Debts

National Debt Relief states that for those that qualify, the client could be getting out of debt in 24 to 48 months.

On its website, the National Debt Relief states that customers will realize 50 percent savings before fees by completing the program. After fees are added the saving is approximately 30 percent. The company notes that some people do not finish the program for various reasons.

While there are several companies offering debt-relief service, National Debt Relief has earned an A+ rating from the Better Business Bureau and is ranked top among other companies according to Consumer Reports.

To summarize what National Debt Relief will provide can be summed up in two points. First, the company will seek to work with your creditors to reduce amounts owed on credit cards, medical bills and other debts previously listed. Then the company will help you eliminate your debt my developing a payback program.

Determining what approach you are going to take is important. Several options are available for most people. Naturally, there are the options presented thus far including the two leading companies, Prosper and Lending Club. Then there is National Debt Relief. There are also three options available, but not necessarily the best choice. These options include trying to reduce your debt without any assistance. The next is declaring bankruptcy, which will impact your ability to use credit for years and the third, which is ignoring the issue and hopes it goes away.

Debts do not just go away. A debt may be written off the balance sheet, but that does not mean collection efforts will cease. In most cases such instances will be turned over to a bill collector, whose only interest is collecting the money, without any concern how it will affect an individual or a family.

Avoiding the Debt Problem

Excessive debt can result from spending too much on non-essential items. This leads to higher credit-card balances, warning notices and possibly calls from bill collectors. Such debt will lower the credit score and will impact the entire family. Excessive debt can also result from unforeseen events, such as losing a job, multiple problems with major appliance, and other high-endpurchases. Also, losing a job with only a small or non-existent severance package can result in sudden debt.

Thus, there are certain things that need to be avoided. Some of the actions that should be approached cautiously include:

  • Adjustable Mortgage Rates: This approach to home buying can cause a lot of trouble. With a beginning rate that sounds very attractive, many people buy a home that is more than they need. Next, the financial markets have a change and the interest rate on the mortgage goes up, sometimes to the point that a person must sell the house, and usually without much profit.
  • Sometimes, it seems like the world caves in around you. The car is hit by another, but the owner has no insurance, and you have to pay the deductible for the coverage your insurance company provides and watches your rates go up.
  • Medical bills can be a major source of concern. No one knows when they are going to get sick or be injured. They have a health policy, but the deductibles are high and the co-payments mount up in a hurry.
  • The central air conditioning and heating system has to be replaced.
  • You lose the job that you have held for 10 or 15 years. Thus you have to buy family health insurance. Your retirement savings are lost as you search for a new job.

These are just some of the scenarios that can lead an individual or family falls into debt. Some of these examples could be avoided by thinking ahead. There are other times, when the unexpected becomes a reality.

Regardless of the cause of financial trouble, there is always a way out.

The options offered here will set most individuals and families on the way to financial security and freedom from debt. However, remember credit problems will not be solved overnight. It is up to the consumer/client to do their part.

If your debt-to-come ratio is becoming a problem, it is best not to wait and hope things will get better. Debt does not disappear by itself. Therefore, it is best to approach the problem as soon as possible.

Lending Club and Prosper are your best choices if you have debt but still have a good credit rating. It is important to act quickly because excessive checks of your credit score or signs that you are behind on your payments can lower your credit.

In cases where the credit score is low, and probably getting lower, then National Debt Relief will be your best option.

One of the main reasons it makes sense to look into a loan to consolidate all your credit card debt is to get one payment instead of many and to lower your APR. You can save hundreds of dollars a month with a low 5.99% interest rate with excellent credit scores versus a average credit card interest rate of 15% and up. Not only that but more of your hard earned money will go towards paying down the principal balance instead of just going to interest charges.

Make sure you get a couple quotes from marketplace lenders since they each have different credit score requirements and underwriting guidelines so while one credit consolidation company may offer you a 5.99% APR with excellent credit, another consolidation company may offer you only a 7.99% interest rate. So shop around for the best deals to make the best choice.

Credit Score Consequences

The better your FICO score the lower your APRs is the general guideline. If you have good to excellent credit scores you will qualify for the lowest consolidation loan rates. Some of the big keys to getting excellent credit scores are only using a small portion of your available credit, making all your monthly payments on time, not applying for new credit often and having a good mix of credit accounts - installment loans, revolving accounts, mortgage and auto loans, and lines of credit.

If you don't have the greatest of FICO credit scores you're not out of luck. You still have options but a low rate credit card consolidation loan may not be one of them. You'll likely have to resort to more aggressive measures like credit counseling, debt management, debt settlement and even bankruptcy to help you resolve your debt problems. You'll need to evaluate all your options before you do anything. There are some good companies out there with good credentials and A+ Better Business Bureau ratings and 1000s of positive client reviews. Those are the companies you want to look at when you're looking for the best debt consolidation loan companies and alternatives.

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