Credit card debt has long been an issue plaguing Americans. However, statistics by Experian have surprisingly shown that credit card debt dropped by 9% in 2020 after years of consistent growth. Amounting to $756 billion, this is the lowest it has been since 2017. On the other hand, mortgages and auto and student loans have increased. Debt consolidation can help address these issues.
This allows you to take out a brand new loan to cover other forms of consumer debt. To put it simply, debt consolidation companies and lenders combine your debts into one big loan. While consolidating credit card debt is one of the more common approaches, this also covers payday loans, medical bills, and other personal loans.
With this, you'll get to pay just one bill instead of multiple. This can also mean lower monthly payments with more flexible repayment terms and a lower interest rate. Not only can you save money on interest and possibly pay off your debt faster, but you might even get to improve your credit score.
Since a debt consolidation loan may still be a foreign and complicated topic for many, allow us to help you choose the best debt consolidation loans that can best address your unique situation.
The following list of the best debt consolidation loans is based on factors such as interest rate, repayment terms, loan amount, credit score minimums, additional fees, and other factors. You may use this as a guide to help you out with your debt settlement.
Financial wellness firm Payoff is an ideal option for those who need to consolidate their debt from credit cards. It's not just limited to that, as they also accept consolidations of other high-interest debts and credit accounts.
You also don't need to have the best credit history as fair credit scores of around 640 are accepted here, with loan terms of two to five years. Payoff's interest rates are between 5.99% to 24.99%.
They'll work together with you to come up with a debt reduction plan, and you may be able to get your funds in two to five business days. While they have no late fees, the origination fee is 0-5%. Loan amounts are between $5,000 to $40,000.
With Best Egg, interest rates are between 5.99 to 29.99%. You can request loans between $2,000 to $35,000 for debt settlement for numerous purposes such as credit cards, medical bills, household remodeling, car repairs, and the like. Upon approval, you can get your funds in one to two business days.
There are no prepayment penalties, but the origination fee can hit 5.99%. To qualify for the lowest APR, annual income should be $100,000 and a good credit score of 700 is required. However, fair credit of 640 will still allow you to qualify for a loan with Best Egg.
Marcus by Goldman Sachs allows you to borrow between $3,500 to $40,000 with absolutely no fees. This includes both late fees and origination fees. APR rates with this lender are between 6.99% and 19.99%, with loan terms that range between 36 to 72 months. Having a good credit score (660) is advised, and you can expect to receive your loan funds in one to four days.
The Better Business Bureau has given them a rating of A+. Although borrowers have the ability to alter the deadlines of their monthly payments, there are certain limitations for the use of funds. Co-signers are also not accepted by this lender.
Discover has great personal loans, with an APR of 6.99% to 24.99%. A minimum loan amount of $2,500 is required, and you can borrow a loan amount of up to $35,000. They have no fees except a late fee of $39 and flexible repayment options of up to seven years. The recommended credit here is 680 and above.
Discover's loan terms are between 36 to 84 months and you can get your funds in a single business day if approved immediately. If not, you will have to wait up to seven business days. You will also have free access to your FICO credit report.
With LightStream, having excellent credit and setting up an automatic payment scheme may grant you a low APR of 3.99%. Rates range between this and 16.99%. To qualify for these lower loan rates, loan amounts should be between $10,000 and $24,999 and should be paid back in three years. However, they also accept loan amounts of up to $100,000 and are not strict about where to use the funds.
They also have no late fee, origination fee, and prepayment fee. Cosigners are accepted here as well. If you do not have the best credit, you can still get competitive rates as they offer borrowers a rate of 0.10 percentage points lower than that of a competing lender with the same terms. In some cases, you can get your funds within the same day.
Debt consolidation loans are advised if you are able to get a lower annual percentage rate compared to what you are using to pay off your existing debts. If you are able to qualify for a debt consolidation loan, some of the benefits include the following:
Check out some of our FAQs to learn more about debt consolidation loans:
Debt consolidation combines debts ranging from credit cards to medical bills and other personal loans into single monthly payments with lower interest rates. This may even allow you to pay off unsecured debts, although others require pre-qualification and approval. In most cases, the APR you are given will depend on your creditworthiness.
Some lenders also have specific debt to income ratio qualifications, especially since debt consolidation does not require collateral. If you're worried about your debt consolidation loan affecting your credit score—worry not, as this is only a risk if you miss or are late on your monthly payments.
When searching for which debt consolidation loans, you can consider factors such as reasonable credit score minimums, low-interest rate, loan amount, multiple options for payments, user experience, and the like. Everyone has a unique debt situation, therefore it is important that you find a lender who can address your needs spot on.
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In one way or another, you may be bound to run into personal debt that you are struggling to pay off. There is never any shame in seeking assistance for this, and a debt consolidation loan could be the financial solution you have been waiting for.
To learn more about managing debt, AnyCredit has all the information you need. Get in touch with us today!