Ten years ago, finding a reputable credit consolidation company was easy. Today, the credit and financial industry has evolved and so have cheap and best credit consolidation companies.
Now, it’s even harder to find a trustworthy company that can consolidate your debt under one simple monthly payment.
This article will show you exactly how to find the cheapest credit card debt consolidation loans available in order for you to get out of debt fast while paying less interest than before.
Credit cards are considered to be one of the most convenient means of the transaction all around the world.
However, at times when people fall short on budget due to certain unexpected expenses, their need arises to apply for instant cash payday loans rather than going through hectic paperwork.
These best credit consolidation companies can help you attain a debt consolidation loan and pay off all the debts under one single monthly payment at a lower rate of interest than before.
Apart from this these loans also consolidate your credit card payments while extending your repayment period so that you do not need to worry about your due dates for future payments.
However, it is important to know that there are certain things that need to be kept in mind while taking out one such loan because if you are not well-versed with the procedure or lack complete knowledge about finance then chances are you might fall prey to the hands of some opportunist lending agency who will charge very high rates of interest or might ask for hidden charges along with fees which certainly do not fit into your budget.
One of the most important known fact is that there are no hidden charges for taking out these best credit consolidation companies.
Interest rates are normally higher in this category of consumer finance but because of the competition, you can look for companies who are willing to go really low on their interest rates and other charges. Sometimes you would need the money for another purpose such as paying off an existing loan.
What Is Credit Consolidation?
Credit consolidation is when you take out a loan to pay off your existing debt obligations.
The idea is that you’ll be paying just one debt, but with a better interest rate than the separate loans you were previously paying.
For example, if you have five credit cards with varying interest rates of 15-20%, then taking out a new credit card with an introductory 0% APR would allow you to pay off all of your accounts except for the least expensive one.
Then when the introductory period expires, it’s possible that your credit score will also improve because you are only making minimum payments on one account instead of several.
This strategy can save money and time by both reducing your monthly expenses and shortening the amount of time it takes until your debt is paid off.
How Do I Find The Best Debt Consolidation Loan?
One of the most important decisions you’ll make when it comes to credit consolidation loans is choosing your company.
There are hundreds or even thousands of lenders out there, so finding the best one for your needs can be difficult.
Here are some things to consider:
- What type of loan do you need (personal vs business)?
- What’s the interest rate?
- How long does it take to pay off?
- Is there an annual fee?
- Are there any hidden fees?
Be careful about companies that offer too-good-to-be-true rates.
All low APR offers come with caveats like balance transfer fees and high APRs after introductory periods expire.
Do Your Research
Paying off debt should be a stress-free experience, and finding the right company can help you achieve that.
The internet is a great place to start because you have access to hundreds of sites that offer free credit card comparisons. You can then decide which company offers your best deal after weighing all factors against one another.
You might also want to talk to people you know who have consolidated their debt before, as they might recommend a specific company or warn against certain ones based on past experiences.
Besides online research and word-of-mouth, you can find out more information from independent review platforms like Credit Karma or Consumer Affairs.
What Credit Score Do You Need for a Consolidation Loan?
Although it might be easier to qualify for a smaller loan with a lower interest rate, making just the minimum payments on your other accounts will likely result in you paying more money over time.
The higher your credit score is, the better terms you’ll receive from lenders. In general, creditors tend to approve applicants with scores of 650 or above.
If your score falls within the low end of the acceptable range, then you may have trouble finding a lender willing to give you a consolidation loan.
One exception would be if one of your credit card companies agrees to consolidate all your debt into their own private loan.
Just keep in mind that this could affect your credit negatively because all that outstanding debt is reflected as yours on paper.
What Are The Benefits Of A Debt Consolidation Loan?
A debt consolidation loan can help you save time and money by allowing you to pay off all your credit card balances at once.
This can free up space in your monthly budget for other things like vacations or a new car.
Furthermore, there’s the option of refinancing your home if you want to get an even lower interest rate on your consolidating loans, which is especially useful if you’re thinking about selling soon.
The major downsides to taking out a consolidation loan are that it costs more money than paying off each account independently (due to fees and extra interest rates) and that it might take longer until they’re paid off since minimum payments are spread across an entire lifetime rather than just one.
It also involves dealing with one creditor instead of several, so it’s important to find a company you can trust.
How Can You Avoid Debt Consolidation Scams?
Financial scams involving debt consolidation are somewhat common because many people don’t realize that there is no such thing as free money.
If someone promises you easy access to cash without the need for credit checks or collateral, then they’re probably trying to scam you out of your time and money.
Unfortunately, these types of cons usually involve borrowing against future earnings (e.g. Russian lottery) or presenting their services as an investment opportunity (e.g. Nigerian oil cartels).
Another type of debt consolidation scam happens when companies convince people to roll over their debts into new ones with ridiculously high-interest rates.
This turns out to be a more expensive way of consolidating debt because you’re essentially entrusting them with more of your money.
Plus, if you miss a payment then they could report it to the credit bureau as delinquent, which would increase your overall interest rate for all of your accounts.
Best Debt Consolidation Companies
Before working with any company, make sure that they are registered by the Financial Industry Regulatory Authority (FINRA).
Not only does this ensures that their business is legitimate but also provides some measure of protection against any mismanagement or malpractice on their part.
Once you have decided on a company, ask about their fee structures and expected repayment periods before signing on the dotted line.
There’s no reason why you should be coerced into committing to a contract before you know how much it will cost and how long it might take.
Additionally, it could be helpful to read some other people’s reviews of the company before signing up.
Websites like Yelp! and Google Reviews allow customers to share their experiences with each company in order for you can make an informed decision about which one to work with.
Does Consolidation Ruin Your Credit?
When you apply for a debt consolidation loan, the lender is going to do a credit check and see all of your existing loans and credit cards.
This will make it look like you’re more in debt than you actually are because some lenders only view borrowers with good or excellent credit as safe.
One alternative would be to consolidate your debts into one card that has a very low limit compared to what you’re used to (e.g. $100,000 on an Experian report versus $5,000).
This way, they can’t tell how much money you really have because there’s less available for them to pull from.
Just keep in mind that if you go this route then you should pay off the entire balance right after receiving each statement. If you don’t, then they could report that to the credit bureau as delinquent and damage your overall credit rating.
Tips for Consolidating Debt
While it might sound tempting, you should not take out more loans than you need simply to speed up the repayment process (e.g. $40,000 instead of $20,000).
This will make it harder to pay everything off because you’ll be spending a lot of money on interest rates each month.
Remember that almost all debt consolidation loans come with higher fees than regular ones due to their riskier nature (higher chance of loan defaulting).
When trying to consolidate your debts, always check the interest rates before signing anything.
The lower these are then the better since this means the company is more confident that you’ll be able to repay them.
The 5 Best Debt Consolidation Companies
(1) FreedomPlus – Offers debt consolidation loans up to $50,000 at a fixed interest rate of 6.99%.
(2) SoFi – Provides personal loans between $5,000 and $100,000 with an APR of 5.49% – 8.99%.
(3) New American Funding – Has no limit on the amount of money they’re willing to loan while only charging 4 points through closing + an annual fee of 1%.
(4) Citizens Bank – Can provide debt consolidation loans for amounts ranging from $7,500 -$35,000 at an APR of 6.99% – 12.74%.
(5) Prosper (Update 2021) – THey make it easy for qualified borrowers to get loan terms with an APR between 5.99% and 35.89%.
Although debt consolidation loans might sound like a great way to get out of debt quickly, they aren’t always the best option.
You should consider all your options and read testimonials from other people who have worked with this company before deciding on whether or not this is right for you.