Why Consolidate Debt?
Debt consolidation is one of the best methods to merge multiple loans into one monthly bill. Usually, it intends to reduce monthly installments by extending loans over a more extended period.
Most Popular Ways of Debt Consolidation
Credit Counseling Agency
Credit consulting agencies examine the customer's financial data and create a debt management plan. They collect your monthly installments and give out to your lender. This method is a perfect solution as credit counseling agencies charge small fees.
Credit Card Balance Transfers
If you have an outstanding balance in different credit cards, you can combine them by taking out a new credit card. You can get lower interest rates and a grace period for 0% interest during the first 12-18 months.
Home Equity Line of Credit (HELOC)
Home equity loans are also an excellent alternative to combine multiple debts into one. However, you have to secure your mortgage with equity.
Of course, it can be an excellent chance to lower interest rates, but you can lose your collateral in the event of nonpayment.
If you have a 401 (k) retirement plan, you can borrow from your retirement balance and pay off your debts. However, at the same time, you can put your retirement savings at risk.
Personal loans are also a suitable choice to collect credit card debts into a fixed monthly bill. As a result, you can convert your revolving obligations into a balanced repayment plan.
Online Debt Consolidation
You can assemble multiple loans into a single credit using online credit tools. Request online personal loans and pay off your obligations quickly.
Almost all lenders set similar requirements for debt consolidation loans:
- You must be a US resident who reached the legal age,
- You must have an active and verified bank account,
- You must not be in bankruptcy or foreclosure.
Debt Consolidation for Bad Credit Borrowers
A poor credit score may be a significant problem to get a new loan. Most traditional lenders, like banks or credit unions, apply strict requirements for eligibility.
However, you may still manage to unite your debts using bad credit loans.
An essential note: Usually, bad credit lenders offer higher rates. Thus, try to review multiple offers and get the best.
Pros and Cons of Debt Consolidation Loans
- An excellent opportunity to lower interest rates,
- Gather multiple debts into one,
- Target only one monthly installment,
- Get an introductory period and avoid paying interest over a fixed term,
- Refinancing through bad credit loans.
- It takes you longer to pay it off,
- You can be required to pay service fees.