Best Personal Loan Options for Debt Consolidation
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What are debt consolidation loans?
Debt consolidation loans can provide funds to pay off multiple unsecured debts and combine them into one fixed monthly payment. Some examples of debts that qualify for debt consolidation loans include medical bills, credit cards, or high-interest unsecured debt. Some lenders can even provide direct payment to lenders. This means all you have to do is provide the debt consolidation loan lender with the information they need to pay off existing debts. If a lender does not offer direct payment they usually deposit the funds into your account and you pay off debts on your own.
Personal Loans for Debt Consolidation
Personal loans are one of the easiest ways to consolidate debt. In addition, they offer competitive interest rates, high loan amounts, and flexible terms. Credit card consolidation loans and personal loans do not dismiss debt but rather make them more manageable. Having multiple credit cards and multiple monthly payments can be overwhelming. You may feel like you are drowning in debt that you will never get paid off. Using a debt consolidation loan can help you avoid late or missed payment fees. They can also help you pay down debt faster and allow more money to go toward the principal of the loan. While debt consolidation loans provide a way to combine debts and make them easier to pay off, they may not make the debt go away forever. We encourage individuals to invest some time thinking about how they got into debt. You should review credit card statements and evaluate spending habits. If you use a debt consolidation loan and continue to spend more than you make, it’s likely that debt will continue to accumulate. Individuals need to make conscious decisions to spend money more carefully and follow budgets. Making a budget can help individuals get out of debt and stay out of debt. In addition, creating a budget can help you determine how much you can afford to pay monthly toward a debt consolidation loan.
Do consolidation loans hurt your credit score?
In some cases, debt consolidation loans may temporarily cause a drop in credit score. However, as old accounts get cleared off your credit report and you make consistent on-time payments, your credit should slowly start improving. Using a debt consolidation loan can also improve your “credit mix.”
Is it hard to qualify for a debt consolidation loan?
Qualifying for a debt consolidation loan may be easier than you think. Lenders usually have minimum credit requirements. If you have fair credit you should apply to a lender that can work with fair credit borrowers. To save yourself time researching and applying to various lenders, you can submit one application online through Acorn Finance. Acorn Finance has lending partners that can help all credit types. Some lenders may allow you to add a cosigner to your application which can increase your chances of approval. If you use a cosigner it should be someone with good credit and consistent income.
What is the smartest way to consolidate debt?
The best way to consolidate debt usually depends on your personal financial situation. However, in most cases a personal loan can be one of the best and easiest ways to consolidate debt. For personalized financial advice, you should consult a professional.
Are debt consolidation loans a good idea?
Consolidating debt into one fixed monthly payment with a low interest rate is usually a very good idea. In most cases, debt consolidation loans allow individuals to save money on interest while paying off debt faster. We recommend evaluating your personal finances and debts to determine if a debt consolidation loan is a good idea for you.
What is the best loan to consolidate debt?
One of the best loans for consolidating debt is a personal loan. Most personal loans are relatively easy to qualify for and offer competitive rates and terms. In addition, some lenders can provide funds the same day.
The 5 Best Personal Loans for Debt Consolidation
Each lender has its own set of perks and specialized target markets. Just because one lender advertises the lowest interest rate, does not mean that is the best lender for you. You should compare actual offers from lenders to determine which personal loan offer is best. So how can you do this without applying to multiple lenders and affecting your credit? Acorn Finance allows individuals to submit one application and receive multiple personalized loan offers for debt consolidation without affecting credit score. Let’s take a look at the top 5 best personal loans for debt consolidation. . .
LightStream offers personal loans between $5,000 to $100,000 for debt consolidation. LightStream is a top-rated lender for borrowers with good credit. They offer low interest rates starting at just 4.49% and zero fees. In addition, LightStream is an Acorn Finance lending partner. To qualify for a LightStream personal loan you should have a minimum credit score of 660. LightStream offers a rate discount for autopayments and is available in all 50 states. If you are approved by another lender with a lower interest rate, LightStram will beat the rate by one-tenth of a percentage point. Of course, they’ll want evidence of the approval and terms before matching the rate. Other lenders may offer direct payment to creditors but LightStream does not.
Best Egg can help fair credit borrowers obtain personal loans for debt consolidation. To qualify for a Best Egg personal loan you should have a minimum credit score of 640. Best Egg offers personal loans between $2,000 to $35,000 with two repayment term options, 3 or 5 years. Since they are willing to approve loans with more risk, they do charge origination and late fees. Compared to other lenders that target similar borrowers, their offers are very comparable. Reviews highlight Best Egg’s transparent offers and terms and excellent customer service. In addition, Best Egg offers financial education for borrowers. Best Egg can deliver funds in one business day and is an Acorn Finance lending partner.
For borrowers with credit challenges, Upgrade offers customizable loan features and a minimum credit score of only 580. When approving applicants, Upgrade focuses on a combination of credit score and cash flow. Upgrade can provide personal loans for debt consolidation for $1,000 to $50,000 with interest rates starting at 6.94%. In addition, applicants can add a cosigner to increase the chances of approval. If you take advantage of Upgrade direct payment to creditors they offer a rate discount. They also offer a rate discount for autopay. Similar to Best Egg, Upgrade only offers two repayment terms of 3 or 5 years and can fund a loan within one day. Customers can utilize a completely online experience with customer service representatives available every day. Upgrade is a proud partner of Acorn Finance.
Prosper is a peer-to-peer lender that specializes in helping fair to good credit borrowers obtain personal loans for debt consolidation. Prosper partners with Acorn Finance and is best for borrowers with a credit score between 630 to 719. They offer personal loans between $2,000 to $40,000 with terms between 3-5 years and rates starting at 7.95%. Prosper charges origination and late fees and does not offer a rate discount for autopayments. In addition, they do not offer direct payment to creditors. However, they still make our list because of their competitive interest rates and flexible qualification standards. Reviews highlight transparent rates and terms and good customer service.
SoFi is one of the best lenders for qualified borrowers. SoFi offers personal loans for debt consolidation with zero fees, rate discount for autopayments, and interest rates starting at 5.99%. They also offer generous loan amounts ranging from $5,000 to $100,000. Customers appreciate SoFi’s user-friendly app that makes managing loans even easier. SoFi can fund loans the same day and provides customers with 7-day support. Borrowers can receive financial education and other perks that are exclusive to SoFi members. SoFi is a top-rated Acorn Finance lending partner.
Is it better to get a debt consolidation loan or personal loan?
In some cases, a debt consolidation loan and personal loan are the same thing. However, if lenders know you are using the personal loan for debt consolidation they may offer direct payment to creditors. This can benefit you and the lender. It benefits you by making the process of consolidating debt easier. It benefits the lender by ensuring the previous debts are paid off. While personal loans usually do not have spending restrictions, lenders may ask if you intend to use the loan for debt consolidation during the application process.
If the lender you use for a debt consolidation loan offers direct payment to creditors, it can be a huge bonus and time savings. However, you should always make sure previous debts are paid off properly and verify you do not need to do anything else. Once your debts are consolidated into one new loan, you can make one monthly payment to the new lender.
What credit score do I need for a debt consolidation loan?
The credit score requirement for a debt consolidation loan can vary depending on the lender. In most cases, you will need a FICO 600 or above to qualify. In some cases, you may be able to qualify with a slightly lower FICO if you have plenty of income and job stability. Before you apply for a debt consolidation loan you may want to check your credit score. There are a variety of Smartphone Apps and online tools that allow you to check and monitor your credit score for free.
Can you get a debt consolidation loan with poor credit?
This usually depends on the lender. Some lenders may have less strict requirements and loans that are designed for bad credit borrowers. If you can qualify for a debt consolidation loan with bad credit you should be prepared to pay high interest rates and high loan fees.
If you have poor credit, you might want to consider taking a few months or longer to rebuild your credit score before applying for a new loan. In some cases, the debt consolidation loan may be part of your plan for improving your credit score. If this is the case, you may want to apply and see if you can qualify. The worst case is that you will not qualify.
How long does debt consolidation stay on your credit report?
Most loans and late payments will stay on your credit report for 7 years. When you take out a loan for debt consolidation, the previous debt that is paid off, can stay on your credit report for 7 years. However, this may not be a bad thing as these will just look like paid accounts. If a professional analyzes your credit history they may be able to tell that you use a personal loan for debt consolidation. Again, this may not be a bad thing. In some cases, they may view this as a responsible move. Once you pay off the debt consolidation loan, this too can stay on your credit report for 7 years.
Are Consolidation Loans Worth It?
In most cases, it is a good plan financially. It can take one or many high-interest credit cards or debt you have and roll them into one lower interest rate loan. As a result, you will now only have to worry about one monthly payment as opposed to several. Make sure the interest rate for the consolidation loan is much lower than your current payments and interest rates. Otherwise, the consolidation loan might not make much sense. In addition, you’ll want to pay attention to any fees that may be associated with the transaction.
Reducing your total debt is always a good idea and will lower your debt-to-income ratio. This can raise your credit score and make you appear more financially stable. Initially the debt consolidation loan may not lower your total debt but over time it should. You should now have one fixed monthly payment and a set term. This means as long as you make the monthly payment for the full loan term, your balance should be $0 by the end of the term.
If you are having trouble remembering all your payments and when to pay them, consider a debt consolidation loan. It can be a smart way to reorganize debt while making it easier to manage. Sometimes having a new payment or new perspective will give you the resources and time you need to get to your money in order and make the payments on time.
What are the drawbacks of a debt consolidation loan?
Just like with any debt or loan, there are some drawbacks. Depending on your current situation, the drawbacks might be worth it. Other people may find the drawbacks too cumbersome and decide not to take a debt consolidation loan. Here are some of the most common cons:
Added costs. This may include origination fees, balance transfer fees, closing costs, and annual fees. Make sure you know the true cost of all the fees you might inquire about and ask the lender what all of them mean before signing the loan documents.
Raise your interest rates. Sometimes debt consolidation loans will charge a higher interest rate than your current debit or credit cards. While the one monthly payment might be convenient, the higher interest rates could make you owe more money as the years or months go by.
Doesn’t solve financial issues. Getting a debt consolidation loan may help make your debt more manageable. However, if you are unable or will struggle to cover the monthly payment, it may leave you in a worse situation.
May encourage more spending. Paying off that credit card balance means you have a higher spending power now and you might be tempted to rack up debt again. If you feel like you can’t control your spending habits or won’t be able to pay off the new credit card balances, debt consolidation might not be the best option.
Risk making the new payments. You will always want to ensure you can take on new payments and have the income to ensure you won’t be struggling with new payments. Missing payments can put your credit score at risk and may negatively affect your ability to borrow in the future.
How do I apply for a debt consolidation loan?
The first step toward applying for a debt consolidation loan is choosing a lender. When choosing a lender you will want to make sure you work with a trustworthy lender that has competitive loan offers. Without applying with several lenders, it may be hard to know who can really offer you the best deal. This is where Acorn Finance can help. At Acorn Finance, you can check offers for debt consolidation loans from top national lenders. The best part just might be that you can check offers within 60 seconds or less with no impact to your credit score. At Acorn Finance we only partner with trustworthy lending partners so that all you have to worry about is selecting the offer that is best for you.
In conclusion, personal loans are an easy option for debt consolidation. Online lenders usually offer competitive rates and terms and have less strict qualification guidelines. In addition, online lenders can offer a seamless and quick process. Most individuals prefer online debt consolidation loans. Acorn Finance partners with credible online lenders that can simplify debt consolidation. Individuals can submit one application through Acorn Finance and receive multiple personalized loan offers within minutes without affecting their credit score. Whether you are confident about obtaining a debt consolidation loan or not, you can use personalized information provided by Acorn Finance to make an educated decision.
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