Debt Consolidation Loans for Good Credit

Countless people in the States have got personal debt that they are endeavoring to pay off in a cost efficient and speedy way. Starting from high-interest credit card debt to multiple credit cards to personal loans with prohibitive rates.

Debt consolidation loans are a good way to successfully improve on your credit score, even if you already have a good score. Paying off debt, and making life easier from the perspective of money management is always a good thing and something you should strive for.

If you need loans of $25,000 or more, you can split the amount into two and acquire two loans instead of one. Normally, it is far easier to get two less substantial loans than a single loan for the same sum. Find the balance which best works for your budget and financial situation. Choose a payment term which is neither too short or too long.

Pick a minimum of 2 lenders to apply to so you can weigh up rates of interest and other terms. Most loan providers do what’s known as a soft credit check that does not adversely affect your credit score. It can be taxing to have a substantial amount of debt, particularly when the interest on outstanding balances is excessive. Debt consolidation offers an escape route, by reducing the interest rate paid on the debt, by streamlining multiple monthly installments into one manageable payment, or a mixture of those two.

Debt Consolidation – The Benefits and the Downsides

Taking out a debt consolidation loan is not an easy thing to do. Therefore, a very thorough research needs to be done to prepare yourself regarding the loan. Naturally, there are of course, several advantages and downsides regarding taking out the said loan. Here we are going to go through each of its advantages and downsides to make it easier for you to choose what is best for you.

The Benefits

Structured Payment System
With debt consolidation loan, the borrowers will only have to deal with just one loan with one monthly payment which is a lot easier and more efficient than keeping track of several separate loans. For example, if you currently have three or four credit card bills that need to be paid off each month, hence you need to keep track on three or four separate monthly repayment due dates. When you opt to use the debt consolidation monthly repayment, you will only have one monthly repayment due date to keep track on.
Reduced Cost of Debt
By choosing the debt consolidation loan, you could also enjoy a reduced cost of the debt for your repayment. The current credit card normally has over 15% interest rate. Many borrowers pay over 20% of their balances on monthly basis. The cutdown of the interest rate help reduces the interest fees on the remaining unpaid debt, this could help you save hundreds to thousands of dollars.

Improve your Credit Ratings
This less well-known benefit of debt consolidation loans could help improving your financial reputation in the long run.

As the payment for the loan is paid in a timely manner, your bad credit score will also improve. If you opt to pay off your credit card balances by using the debt consolidation payment option, the immediate increase of available credit will also help improve your bad credit as the credit utilization rate is lowered.

The Downsides

Credit History Elements
Trying to obtain a debt consolidation loan that offers an affordable interest rate is quite challenging if you have poor credit score. This will cancel out the advantage of having a less expensive debt repayment schedule.

Low Monthly Payments Equals to Prolonged Repayment Period
With debt consolidation loan, you will enjoy the low monthly payment. However, this will also mean that it will take longer for the debt to be paid. It is true that an extended term of repayment would reduce the monthly fee, but in the long run the sum of the interest paid may be equal or even higher than using other type of conventional loans.

Details to Pay Attention to Regarding the Debt Consolidation for Good Credit

When you’re trying to determine whether debt consolidation for good credit is a wise option for you or not, there are some details for you to pay attention to and to take into consideration before you begin. For a start, most loan providers will charge you premiums for the debt consolidation loans.

The possible fees to be charged include:

  • Origination fees – which is imposed when a loan is approved
  • Funding fees – which is incurred whenever a loan is funded or approved
  • Late payment fees – which is charged whenever a monthly repayment is paid later than the due date
  • Prepayment fees – which is incurred when the loan balance is paid off before its actual payment date
  • Application fees – which is charged when the application is submitted

These charges are in addition to the interest rates offered by the loan provider on a new debt consolidation loan for good credit. It is very important for you to fully understand which charges are made on your loan to make sure that you choose the most manageable solution for your debt repayment in the long run.

Charge like the prepayment fee which is imposed when the borrower repays the loan balance before the repayment term ends is often overlooked. Bear in mind that, if your goal is to pay off your loan before its repayment term ends and that the loan has a prepayment charge, it might not be a good idea to use a debt consolidation loan to repay for that existing debt. You will end up having to pay the prepayment charge.

An Offer with High Interest Isn’t as Bad as it Seems

You as the debtor need to be aware of the possibilities that the debt consolidation loan would be offered to you with a higher interest rate than what you anticipate if your credit score is not satisfactory. The loan providers will look at your credit history, your income and even perhaps your various other assets like your saving accounts to verify your eligibility for a loan. If these requirements are not met, there is a higher chance for the loan offered to have a high interest rate.

If you are in that situation, you either have the option to delay the loan application until there is an improvement on your credit score and then re-apply or you can just go ahead with the consolidation loan with a high interest rate offered to you if your current debts are tough to manage and the method of single monthly payment is more preferable for you instead of having to make several separate payments.

To Conclude

Deciding to consolidate your debt is never easy. You really need to take some time to determine which debt consolidation option is best suited for you, how well is your credit score to help you get a preferable debt consolidation loan. Or to get help through a credit settlement service, and also to be aware of all the charges involved with both options. It is also necessary to be sure of your ability to commit to your monthly payments and to be certain on exactly how long the repayment term for the debt consolidation loan is going to take.

To conclude, you need to focus on your actual need for a debt consolidation loan, be mindful of your qualifying credentials for getting the said loan, and your willingness to minimize your other debts before you decide to sign for a new debt consolidation loan.

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