Do you feel overwhelmed by paying too many bills each month?
Are you looking for a loan to pay off your credit card debt? Or do you just want to pay off all your debt and not stress about that every day?
We have all the answers for you. House of Banks has prepared a detailed article for you, to solve your problems.
What is debt consolidation
A debt consolidation is a process of taking out one loan to pay off your unsecured debts.
If you have multiple credit card bills, a debt consolidation loan can be used to pay off those bills in one simple monthly payment and help you tackle down missed payments.
Typically, debt consolidation loans are used for unsecured debt such as:
How to get a debt consolidation loan
There are two favorite ways to do that:
- A 0% interest balance-transfer credit card – transfer all your debts onto balance-transfer credit card and pay the balance in full
- A fixed-rate debt consolidation loan – Use the money from the loan to pay off your total debt and then pay back the loan in installments over a set period of time
Two more ways to consolidate debt are taking out a home equity loan or 401(k) loan.
These two ways could be the option, but there is a high risk to your home or retirement.
Another option is to take a mortgage, which is kind of misleading and it doesn’t actually have the same purpose.
Decide which debts to pay off
Pay down your debt
Benefits of a debt consolidation loans
As we mentioned before, debt consolidation loans can be very helpful for many consumers, helping them save money on interest and monthly payments, or even increase their credit score.
Interest savings – If you get a debt consolidation loan with lower rate, you can save on total interest, even if you have multiple sources of debt with high annual percentage rates.
Lower monthly payment – Choose a debt consolidation loan that lowers your monthly payments, but not interest. You will end up paying more in total, but payments are going to be much easier for you to handle. Another great benefit is that you will less likely pay additional fees and penalty APRs in case of missing payment.
Improved credit score – Your credit score can increase with a debt consolidation loan. You will have more total credit available if you take out a new loan and leave consolidated accounts open, but unused.
credit card consolidation
Are you also tired of making multiple credit card payments each month?
Very common suggestion is to take out a loan to pay off all your credit card debt. After that, you will have only one single payment with lower interest rate than your credit card debts and you will pay down less in interest.
There are many ways how to do that, but not all of them might be a good fit for you. It gets tricky when you have to decide what to do with your credit card consolidation. House of Banks has prepared a few suggestions to do so;
- Open a balance transfer credit card and transfer all your debts
- Take out a personal loan
- Work with a nonprofit credit counseling organization.
- Borrow or withdraw money from 401(k) or IRA
- Borrow against your home or vehicle
- Borrow money from a friend or relative
does debt consolidation hurt your credit
You might be wondering if debt consolidation can hurt your credit. In theory, it can. Debt consolidation can lower your credit score by a few points temporarily. Although, if you make all your payments on time, the overall effect should be positive.
You still might be feeling confused so let’s summarise it again.
Yes, debt consolidation can hurt your credit, but only for a short period of time.
If you create a solid plan on how to manage your debt consolidation or credit card consolidation, make all payments on time, your credit score will definitely increase!
Don’t be stressed out that you will have bad credit afterwards.
debt consolidation loan calculator
Do you want to estimate your savings with debt consolidation loan calculator? We recommend using the Discover debt calculators for easy overview of what options you have.
- See your balance transfer savings
- Estimate your savings with a personal loan
- Calculate your savings with a home equity loan
Discover offers lots of useful information regarding finances. Startups, middle or big companies, all can benefit from the information, found on the website.
All in all, it’s pretty difficult to finance your debt if you can’t manage your finances right.
However, you have multiple options how to deal with a debt consolidation. We cannot say which option is the best fit for you, however, it’s very subjective and it differs from person and situation.
Therefore, we can recommend you to choose the least risky option and not to expose yourself to more types of risk, in order to strengthen your financial situation.
Remember to be realistic and create a plan you can stick to no matter what happens.
Can debt consolidation loan help me pay down debt faster?
It can definitely help you pay down your debt. However, it depends on your ability of making your monthly payments on time.
What kind of debt can I consolidate?
At first, you have two options; take a loan or a balance transfer. Then you can consolidate credit cards, gas cards, store cards, medical bills, high-interest loans and many more. Additionally, you can even consolidate your student loan by refinancing federal and private student loans into one monthly payment.
How can I consolidate credit cards?
The principle is the same as before. You can either take a debt consolidation loan to pay off your balances or transfer your other credit card balances onto one credit card.
How much can I consolidate with a private consolidation student loan?
You can consolidate up to an amount of your education loan debt. In addition, the minimum consolidation loan amount is $5 000.
What kind of interest rates can I get with a balance transfer?
Rates differ from person to person. They have low promotional or introductory rate, meaning they can be as low as 0%.