Although debt consolidation can be helpful for many people, it cannot solve all your financial problems on its own. Otherwise, you could put your credit in a worse position. Consolidating your debt can save you money. If you have several credit cards with double-digit interest rates and you qualify for a debt consolidation personal loan at a lower rate, you can save a lot of money in interest and, potentially, fees. It also simplifies your finances.
A debt consolidation loan combines multiple debts into one monthly payment with a fixed rate and a set repayment term so your monthly payments stay the same and you know when the debt will be paid off. Credit card rates are variable, so your monthly payments differ depending on your balance, and it can be hard to know when your debts will be paid off. Additionally, using a consolidation loan to pay off multiple debts, especially credit card accounts, can have a positive impact on your credit score.
Credit scoring models, like FICO and VantageScore, place a lot of weight on your credit utilization ratio how much of your available credit you have used. When a new consolidation loan lowers your credit utilization ratio, your credit score might climb as a result. Debt consolidation is not right for all situations, but if you fit the following criteria, it may be worth considering:. Each lending institution has its own criteria for qualifying borrowers.
Common requirements are that borrowers be at least 18 years old, legal residents of the U. Most lenders look for a minimum credit score in the mids and a debt-to-income DTI ratio below 45 percent. DTI is the percentage of your gross monthly income that goes toward your monthly debt payments.
An excellent credit score and low DTI will get you the best interest rate and may qualify you for a larger loan. Even if you have bad credit , you may find a lender that's willing to extend you a loan, but you'll pay higher interest rates. If you're in this scenario, you may want to apply with a co-signer who has good credit to improve your chances of being approved.
Having a good-credit co-signer improves your overall credit picture, but keep in mind that the co-signer shares responsibility for the loan if you fail to make payments.
Learn more: How to get a debt consolidation loan with bad credit. Applying for a debt consolidation loan may temporarily dent your credit score because the lender will have to do a hard credit check before it can approve you. However, if you make your monthly loan payments on time and don't rack up card balances again, a credit card consolidation loan can improve your credit score.
You can consolidate debt without hurting your credit. Personal loans for debt consolidation have several features that are less likely to damage your credit than revolving debt like credit cards. A personal loan is an installment loan with a fixed rate, fixed monthly payments and a fixed payoff date. This makes them easier to budget for and a cheaper form of credit than credit cards, which have variable interest rates, payments that change depending on the rate and balance and no clear payoff date.
The fact that many people take out installment loans to pay off their revolving loan balances says a lot about the potential credit benefits of debt consolidation loans.
It might be cheaper to consolidate your debt with a 0 percent balance transfer credit card. With a balance transfer card, you shift your credit card debt to a new credit card with a 0 percent introductory rate. The goal with a balance transfer card is to pay off the balance before the introductory rate expires so that you save money on interest.
When you calculate potential savings , make sure you factor in balance transfer fees. Learn more: Balance transfer fees and how to avoid them. Keep in mind that paying off existing credit card debt with a balance transfer to another credit card isn't likely to lower your credit utilization ratio like a debt consolidation loan would. A debt consolidation loan also is going to offer higher borrowing limits, enabling you to pay off more debt, as well as fixed monthly payments, which make it easier to budget and stay disciplined with paying off debt.
Borrowers with bad to excellent credit can qualify for debt consolidation loans, but those with very good to excellent credit get the best rates. There are lenders that specialize in loans for people with bad credit, but the cost is higher.
One popular way people pay off debt is to use the equity in their homes. Home equity loans and home equity lines of credit HELOCs let borrowers use their homes as collateral in exchange for financing. The lender can seize your home if you can't make the payments. These companies reach out to creditors and debt collectors on your behalf and try to settle the debt for a lesser amount.
If you decide to pursue debt relief services perhaps as an alternative to bankruptcy , be aware that the fees these companies charge can be steep. Take your time to fully research fees, reviews and other details before applying. Another option that can help you get debt under control is credit counseling.
Credit counseling companies are often though not always nonprofit organizations. In addition to debt counseling, these companies may offer a service known as a debt management plan, or DMP.
With a DMP, you make a single payment to a credit counseling company, which then divides that payment among your creditors. The company negotiates lower interest rates and fees on your behalf to lower your monthly debt obligation and help you pay the debts off faster. Details: Best debt consolidation loan companies of Best for high-income earners with good credit: Best Egg Best for consolidating credit card debt: Payoff Best for high-dollar loans and longer repayment terms: LightStream Best for smaller loans with a credit union: PenFed Best for fair to poor credit: OneMain Financial Best for good credit and next-day funding: Discover Best for consumers with little credit history: Upstart Best for consolidating large debts: Marcus by Goldman Sachs.
Best Egg: Best for high-income earners with good credit Overview: Best Egg offers unsecured personal loans for a variety of purposes, including debt consolidation. If you have a credit score as low as , you may qualify based on other criteria, such as income. Perks: There is no penalty if you pay off your consolidation loan ahead of schedule.
What to watch out for: Origination fees range from 0. APR: 5. FEES: Origination fee: 0. Payoff: Best for consolidating credit card debt Overview: Payoff is specifically for borrowers who want to pay off their credit card debt.
The application and approval process are done online. Why Payoff is the best for consolidating credit card debt: Its personal loans can be used only to consolidate credit card debt. Perks: There are no application fees, prepayment penalties, late fees or annual fees.
Borrowers with a credit score of or higher may qualify. What to watch out for: Origination fees range from 0 percent to 5 percent. Read Bankrate's Expert Payoff Review. LightStream: Best for high-dollar loans and longer repayment terms Overview: You must have excellent credit and sufficient assets and income to qualify for a jumbo-size personal loan.
Perks: There are no origination fees or penalties for paying off your debt consolidation loan early. The application and approval process is done online, making it possible to get approved and have the money deposited into your account on the same day. APR: 2.
FEES: None. PenFed: Best for smaller loans with a credit union Overview: Pentagon Federal Credit Union, known as PenFed, offers unsecured, fixed-rate personal loans for debt consolidation. Perks: PenFed does not charge origination fees, annual fees or prepayment penalties. APR: Starting at 5. OneMain Financial: Best for fair to poor credit Overview: Loan amounts are smaller and rates are higher than typical debt consolidation personal loans, but the lender is still a good alternative to the high interest rates and hidden fees that can come with payday loans.
Your credit history, income and debt load determine whether you qualify. Why OneMain Financial is the best for fair to poor credit: It offers unsecured, fixed-rate loans to consumers with damaged credit at lower rates than risky payday lenders, which can charge as much as percent interest. Perks: There is no penalty for paying the loan off early.
If you do not qualify for an unsecured personal loan, OneMain may accept your car, boat, RV or motorcycle as collateral, provided it is insured and appraises at a sufficient value. The fee varies by state and is rolled into the monthly payments. Late fees also vary by state. Discover: Best for good credit and next-day funding Overview: Discover offers unsecured personal loans for debt consolidation, with the option to pay creditors directly.
Perks: Discover personal loans have no origination fees, closing costs or prepayment penalties. Also, co-signers are not permitted. Our top picks of timely offers from our partners More details. SoFi Personal Loans. LightStream Personal Loans. We may receive a commission from affiliate partner links. Click here to read more about Select. Click here to read our full advertiser disclosure. We may receive a commission when you click on links for products from our affiliate partners.
See our top picks for personal loans:. When narrowing down and ranking the best personal loans, we focused on the following features: No origination or signup fee: None of the lenders on our best-of list charge borrowers an upfront fee for processing your loan. Fixed-rate APR: Variable rates can go up and down over the lifetime of your loan. With a fixed rate APR, you lock in an interest rate for the duration of the loan's term, which means your monthly payment won't vary, making your budget easier to plan.
No early payoff penalties: The lenders on our list do not charge borrowers for paying off loans early. Streamlined application process: We considered whether lenders offered same-day approval decisions and a fast online application process.
Customer support: Every loan on our list provides customer service available via telephone, email or secure online messaging. Username: Your Username: must be 6 to 12 characters can only contain numbers, letters, and underscores. Your password must be 8 to characters and contain at least 3 of the following 4 criteria: an uppercase letter: A-Z a lowercase letter: a-z a number: any of these special characters:!
Frequently Asked Questions We can assist you with your questions. View FAQ. Maintenance Notification. We apologize for any inconvenience this may cause and thank you for your patience.
Consolidation If you decided that consolidation is the right option for you, apply online now at StudentAid. Consolidating Your Loans Learn more about consolidation to determine if it is the right option for you.
Consolidation Timeline Learn what to expect if you decide to consolidate your loans. Back to Consolidation Consolidating Your Loans A Direct Consolidation Loan allows you to combine one or more federal education loans into a single loan. Take Our Consolidation Quiz! Our Consolidation Quiz can help you determine if consolidation is the right option for you based on your current situation. Take Quiz. Potential Advantages to Consolidation. Here are some of the potential advantages to consolidation: One servicer, one bill, one payment Managing your federal education loan debt with one servicer and one monthly payment may be more convenient than with multiple servicers.
The option to choose your servicer! When completing an electronic application, you will be given the opportunity to select the federal loan servicer you would like to help manage your Direct Consolidation Loan.
Potential for lower monthly payments by extending the time you have to repay your loan Fixed interest rate If you have variable rate loans, consolidation will switch your variable rate into a fixed rate. Potential Disadvantages to Consolidation. Before you submit an application, it is important to understand why you would like to consolidate and the potential drawbacks of consolidation: Longer repayment term If consolidating extends your repayment term, you will pay more interest over a longer period of time.
Outstanding interest will capitalize add to your principal balance at the time your loan is consolidated If interest is capitalized, your total outstanding loan balance will increase, which means more interest will accrue on your loans each day. Weighted average interest rate for the Direct Consolidation Loan is rounded up to the nearest one-eighth of one percent Potential loss of loan incentive program benefits Potential loss of Servicemembers Civil Relief Act SCRA benefit eligibility In order to qualify for the SCRA interest rate benefit, your loan must have been disbursed prior to the start date of your active duty service.
After the U. Department of Education receives the LVCs, approval of the application for a consolidation loan and paying off the old loans can take an additional two weeks. Until the loan servicers for both the old and new loans tell you that the process is complete, you should continue making payments on the old loans. You will receive letters from both the old and new loan servicers telling you to send payments to the new loan servicer.
Any payments you make to the old loan servicer soon after the consolidation is complete will be forwarded to the new loan servicer.
0コメント