When done right, this financial service can better organize your credit debt. To learn more about how debt consolidation loans achieve this, continue reading the sections below.
What is a debt consolidation loan?A debt consolidation loan is a loan that combines all unsecured debts into a single monthly payment. Basically, it is a loan to pay off other loans. The purpose of debt consolidation is to simplify your payments every month. Without this kind of loan, you would have to continue to divide the payments you owe to individual creditors every month.
When you consolidate your debt, your high-interest debts are put together into a single loan with a lower interest rate. This means lower monthly payments in most cases. The most common type of debt consolidation is credit card consolidation. This is because credit cards are the most common type of unsecured debt Americans carry.
When you begin the consolidation process, you get to choose between two solutions: a new credit card or a debt consolidation loan. Whichever you choose, your combined debts will be placed on that solution.
The credit card is typically a zero interest balance transfer credit card. However, if you want to limit your spending in the future, then merging your debt into a loan might be a better choice.
Tips for Finding Debt Help
The first detail to consider is whether you should consolidate your debt. While you are looking for debt advice or help, it is important to address your financial habits. For example, obtaining this kind of loan with poor credit may not be helpful. Poor credit can increase the interest rate on your consolidated loan rather than decrease it.
However, if you think a debt consolidation plan will work for you and you put a plan in place, the next step is to look for a trustworthy credit consolidation company. The Consumer Financial Protection Bureau will have a list of companies that should not handle your debt. Review the list while searching for companies to make sure you are dealing with an ethical financial institution.
After finding a company you want to work with, you can speak with a trained credit counselor. These counselors generally charge a fee but can help you develop a debt management plan that will work for you.
Best Debt Consolidation CompaniesThere are plenty of debt consolidation companies that offer varying services, from simple consolidation to negotiating credit card debt for settlements. Certain companies are reputable and have helpful offers, but not every offer is made the same. So you want to make sure you pick a plan that works for you.
When it comes to picking the right offer, you must be familiar with your financial situation. Understanding where your credit stands right now allows you to choose the right credit consolidation offer.
For example, you don't want to choose an offer that is mainly for people with poor credit if you have decent credit. Doing so will mean it will cost more money to pay off the loan in the long run because of the higher interest rate that comes with lower credit scores.
Check out some of the best debt consolidation companies today in the sections below.
Marcus by Goldman SachsObtaining a debt consolidation loan from Marcus by Goldman Sachs is beneficial for any borrower looking to consolidate debt. The company has a mixture of competitive interest rates and no fees. For instance, there are:
- No origination fees, which cover the cost of processing the loan
- No prepayment fees, which is a penalty fee for paying a loan off early
- No late fee charges, but it is still crucial for your credit score to pay on time
OneMain FinancialThis debt help company provides good debt consolidation options for people with low credit. This company has no minimum credit score and will accept certain borrowers with poor credit. OneMain Financial does have origination fees, which vary.
Because this offer is for borrowers with poor credit, the interest rate is higher than those of other credit consolidation companies. The rates range from 16.05 percent to 35.99 percent. But that is the tradeoff because this company is more willing to accept those who made credit mistakes in the past.