Guide

Home > Money Guide

Should you go for Debt Consolidation Loan? Learn the various aspects of it for a better decision

A debt consolidation loan is a kind of personal loan that enables you for paying off your existing debts and you can then payback that loan over a period of 2 to 7 years in turn. You may find it difficult to manage your multiple loans in most of the times and often have problems in making payments within your due dates. High-interest rates could be another factor that may inhibit you from paying back your loans in time. In a complex situation like that, debt consolidation loan could be a better option for you to make your payment options simpler and interest rates lower.

The debt consolidation lenders have various offers to make you feel more convenient to deal with your present complex financial situation. They offer transparent pricing, fixed interest rates, reasonable APRs, multiple options for the amount of loan along with its pay off periods. It will also ensure you for not paying any prepayment fees. This is a very comfortable and wanted option for you. 

Terms and rates for borrowing loans

The exact terms and rates for borrowing money will actually depend on your financial history. The borrowers with credit scores in the mid-to-upper 600 have multiple good options. The lender ensures a credit score of 700, although Avant and Upgrade are looking for a range of 620-580.

It is always prudent for you to apply multiple lenders so that you can compare various offers made by them. Each of the lending companies has their own in-house algorithms to calculate its lending rates. Therefore, comparing them amongst multiple lenders will always provide extra benefit. The process is quite easy for each application as the process will require only less than 3 minutes for a single application. You will also be informed immediately whether you are pre-approved and if so, what will be the rate of interest. There will be only a flexible tool on your credit score at this initial stage, and therefore, there is no harm for you to compare various offers at this stage to gain some extra benefits for yourself.

How to avail the best Debt Consolidation Loans?

In reality, there is no actual difference between a debt consolidation loan and a generic personal loan. It is only used as a marketing term by the banks, and the financial institutions make you understand the purpose and utility of the use of the loan. But amongst most of the banks and credit unions, opting for online lenders will be a sagacious decision for you.

Unlike banks, the online lenders are mostly self-regulated, and they have a much simpler approval process.  For approving a loan, a bank needs to follow strict guidelines provided by the authority and the directors and board members cannot change them or flout them in accordance with their own will.  Therefore, approval of loan is quite a difficult process in a bank. But it is not the case for the online lenders, as they are self-regulated and therefore, have a simpler approval process. That is why being approved for a loan and getting the money in your bank account is quite a faster process which does not even matter of weeks but might be hours or days.

Opting for online debts

Another positive point for opting online lenders is the wide availability of them. In many cases, they are region or industry-specific. But it is always better to opt for the lenders who are available and operational in multiple states.

For the online lenders, you don't have to be a member of them to get a loan which a bank will always ask you to be. In a complex financial situation, when you are trying to get rid of economic hazards, all these paper works are quite unwanted for you. Therefore, it is always sensible for you to go only for the online lenders for ensuring a debt consolidation loan.

 Since different lenders have a different set of terms, therefore, it is up to you find the lender who will be the best suited in your present financial situation. The APR and origination fee are the two significant charges which come in a range for most of the lenders.  But it is your credit score and other factors like your employment status and cost of living, which will decide the exact percentage that will be offered. It will be an arduous process for you to analyze all the offers for the different lenders and finally select one which will be the most beneficial for you in the long term of your paying.

You will have APR range somewhere between 5% and 36%

As far as APR is concerned, most of the lenders have a very tight pack that lies between 5% and 40%.  You will find that your most preferred lenders will offer you as maximum as 34% to 36%. The better credit history you will have, the better rate you will ensure. But you must keep the basic fact in your mind that ensuring a low APR is a critical factor for you. 

The origination fees could be 0% to 6%

The origination fees could be your biggest headache while encountering with consolidation toptenreviews for loans. It is the payment your lender charges as the administrative fees to set you up with a loan. Amongst the personal loans, the origination fees equally fall in a tight pack as that of APR which in this case is a range of 0%–6%.

 Fixed interest rates are offered to you

You will have various options for loans with both fixed and variable interest rates. But the fixed interest rate is always a more suitable option for you. The fixed interest rates will not change throughout the tenure of the loan. On the other hand, the variable interest rates may appear alluring for you with its low initial rate. But in due course of time, it may reach an unpredictably higher rate of interest that is quite perilous for you.

They will offer a broad range of loan amount and a variety of repayment plans

Most of the lenders have a wide range of loan amounts to offer to you. It could be as low as $2,000 to as high as $100.000. Therefore, it is an excellent option for you to meet your own requirement and borrow the exact amount of loan that you need overcome your debt burden.

Hopefully, you this article on debt consolidation will help you in your business. To know more about it as well as other terms related to debt, you can check out our other blogs!