Debt Consolidation Loans

What Is Debt Consolidation?

Debt consolidation – not to be confused with debt settlement – is just like it sounds. It’s a simple way to use a personal loan to consolidate multiple unsecured debts (like credit cards, medical bills, payday loans) into one monthly bill. For example, instead of making payments to multiple creditors, you make a single payment to the lender of the debt consolidation loan instead.

Because personal loan rates can be lower than credit card rates (which have an average of around 15% APR), it’s possible to save a lot of money in interest rate payments. By extension, this could help lower monthly payments and/or pay down debt faster.

The best way to compare apples to apples is to get rates that are personalized to your current situation. It’s really simple – almost like searching for a flight or hotel.

Debt Consolidation Loans Pros

• Potentially lower interest rates vs credit cards
• Easy application process
• Less risk since an unsecured personal loan isn’t tied to an asset
• Funds usually come through quickly
• Potential credit score increase

Debt Consolidation Loans Cons

• Sometimes lenders charge origination fees. Double check the numbers & do a bit of “comparison shopping” to make sure you get the best offer available.
• Teaser rates require a high credit score (somewhere between 780-850). Note that it’s pretty easy to get rates personalized to you.
• There aren’t many options available (if at all) for credit scores below 600.