Consolidate Your Debts and Save

Debt consolidation loans can help you manage and pay off multiple debt obligations

Know Your Debt Consolidation Options

Credit card debt, student loans, medical bills, and more create multiple debt obligations. This amount of debt can make the path to financial freedom seem overwhelming. Add in a poor credit rating or history of bankruptcy and things can get even more difficult.

Debt consolidation provides a solution for the overwhelming stress of managing multiple payments. With a single loan application, you can combine unsecured debt to a single lender. That means one monthly payment and, potentially, a lower interest rate.

There are many ways to consolidate your debt. Loan refinancing, using home equity or taking out a personal loan are a few of the options.

Want to know if debt consolidation is right for you? Click search lenders below to see a list of lenders near you. Reach out with no obligation, whether you are ready to start a loan application or just have a simple question.

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Loan Types

Loan refinance, personal loans or home equity loans

Loan Term

2 to 15 years

Time to Fund

< 1 to 30 days

How to Consolidate Your Debt

  • Analyze your debt picture. Calculate all of your loan balances, monthly payments, average interest rate and the total time until debt is paid off.
  • Brainstorm your financial goals. Consolidation is a long-term, measured solution to pay off several debts. If you are seeking quick relief from loan payments or are capable of paying off all your debt within in a year, consolidation may not be beneficial.
  • Compare debt consolidation options. Compare your total interest expenditure until your debt is paid off in full to the terms of the debt consolidation loan to ensure you are not spending more money in the long term.

Is Debt Consolidation Right for Me?

  • I am seeking a long-term debt-management plan
  • I am not seeking quick relief from existing loans
  • I can’t pay off my existing debt

Types of Debt Consolidation Loans

There are three primary ways to consolidate your debt: refinancing your existing loans, taking out a personal loan or using home equity to pay off your debt.

Refinance Existing Loans

When refinancing existing loans, debt is packaged into a single loan with the intention of obtaining better terms — either a lower interest rate or lower monthly payments over a longer period of time. Lenders will assess your credit score when setting interest rates, and approval typically can be obtained in a few days or less. Application or early repayment fees may apply.

Get a Personal Loan

You can use a personal loan to pay off your debts, bundling your debt into a single, unsecured loan with a fixed or variable interest rate. Your credit score will influence the maximum loan amount and interest rates. Personal loans are medium- to short-term loans – typically five years or less – and may result in a higher monthly payment. Some lenders charge origination fees of as much as 6 percent as well as prepayment penalties. A personal loan can be obtained in a few days or less, with fund disbursement following a few days after.

Use Home Equity

Home equity can be used either through a home equity loan or home equity line of credit. A home equity loan is a lump sum loan secured against your home, while a home equity line of credit is a revolving credit facility that can be repeatedly drawn on and paid off. Maximum loan amounts for both are typically as much as 85 percent of the home value, minus any outstanding mortgage amounts.

Obtaining a home equity loan or home equity line of credit can take up to a month to complete, with application approval taking up to 10 days and fund disbursement up to four weeks following approval. Typical fees for a standard mortgage apply, oftentimes alongside an annual fee for the duration of the loan.

As a secured loan, using home equity gives lenders the confidence to offer lower interest rates than on unsecured loans. However, if the repayment period is extended with a home equity loan or you end up carrying a balance on a home equity line of credit, you may end up paying more interest in the long run. Most importantly, as a loan secured against your property, you risk losing your home if you default.

Borrow Wisely Tip

Consolidation does not reduce or eliminate debt, but combines it under better rates for easier management. Watch your spending carefully after consolidating to avoid getting further into debt.

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Why Consolidate Your Debt?

Lower Rates on Student Loans

Federal student loans, private student loans or a combination of both can be consolidated into one vehicle with potentially lower interest rates.

Save Money on Credit Card Debt

Credit cards typically carry very high interest rates. Consolidating existing credit card debts into one loan with lower rates can save you money.

Lower Payments on Personal Loans

If you refinance your loans at a lower rate, you can extend the repayment period and reduce your monthly payment.

Debt Consolidation Loans: Terms and Rates

Debt consolidation loans vary in terms and rates. That is why you should shop around and compare offers from debt consolidation lenders. Generally, lenders determine debt consolidation loan terms and rates based on the following criteria.

  • Credit score. Your credit score is the primary factor behind interest rate eligibility. The stronger your credit, the lower your interest rates.
  • Debt-to-income ratio. Lenders want to see that you have a sustainable income that can support your debt obligations before extending or consolidating loans.
  • Collateral. Secured loans that are placed against collateral — such as your home — typically offer higher loan amounts and lower interest rates.

Variable vs. Fixed Rates

Moving from a variable interest rate — typically tied to the prime rate — to a fixed interest rate can eliminate volatility and save you money in the long term.

Consolidate Your Debt Despite Low or Bad Credit

When you have low or poor credit scores, debt consolidation is more challenging, but not impossible. First, work on boosting your credit score to improve your chances for financing and obtaining lower interest rates.

If your credit rating is 620 or higher, consider a home equity loan. If you default on the loan, however, you risk losing your home.

If your credit score is lower than 620, consider consolidating your debt with a personal loan. A secured personal loan, also known as a title loan, allows you to use an asset for collateral and results in lower interest rates. An unsecured personal loan is more risky for the lender, so tends to have higher interest rates. Compare rates and fees carefully to ensure that consolidation still will save you in the long run.

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