Debt Consolidation Loan Rates

What are the current debt consolidation loan interest rates historically?

Credit score can make a big impact on the interest rate you qualify for when applying for a debt consolidation loan. It's a good idea to obtain free copies of each of your three free credit reports before applying for a loan if you are unfamiliar with your credit score. Once you know your credit score you can proceed with applying, decide to improve your score before applying, or decide not to apply.
As a consumer in the United States, you are entitled to one free copy from each of the three credit bureaus every 12-months. There are plenty of online credit monitoring services that can help you secure your free credit reports free of charge. You should monitor your credit score on a regular basis, credit monitoring Apps can help you do this. This can help you determine fraud faster and allow you to see how your actions affects your credit score.
Once you have an idea of what credit category you are presently in, take a look at what the average APRs currently being charged are historically:

Excellent credit – ( 720 to 850) 11.2% est. APR

Good credit – (690 to 719) 15.5% est. APR

Fair credit – 630 to 689: 20.5% est. APR

Bad credit – 300 to 629: 25.3% est APR

If you do not like the estimated APR that your credit score produces, or if you are close to entering into a better credit score category, there are a few actions you can take before applying for a debt consolidation loan that should help you get over that threshold. If you are trying to quickly improve your credit score, you may want to pay down as much credit card debt as possible, take care of any delinquent accounts, continue making all your payments on time, and avoid opening any new lines of credit. You should keep in mind that these rates are averages. The best way to know exactly what you qualify for is to get pre qualified. At Acorn Finance you can check offers without impacting your credit score so that you know exactly what you might qualify for.

How are debt consolidation loan interest rates determined?

Lenders typically have a set of requirements they use to determine the interest rate an individual qualifies for. Credit score and debt-to-income ratio usually have a lot of influence over whether or not an individual qualifies and or what they qualify for. If you need a debt consolidation loan you may be carrying a lot of debt, which could impact your approval. If given the opportunity you should indicate to the lender that you are seeking a debt consolidation loan. In some cases, a debt consolidation loan is called a personal loan so there may be some confusion.
Generally, the higher your credit score, the lower your interest rate will be. The lower the credit score, the higher the interest rate will be. As this is a general rule, other factors do come into play such as who the lender is, what the income of the borrower is, current market conditions, and whether or not the loan is secured or unsecured. Unsecured loans tend to come with higher interest rates and fees since there is no collateral to back the loan. Since lenders are then taking a risk on a good-faith deal with the borrower, they may ask for higher interest rates and even origination fees. If you are considering a debt consolidation loan and you are looking for the lowest rates possible, looking for a secured loan instead of an unsecured loan may help you find the lower rates and the least amount of fee.

Where can you get the best debt consolidation loan rates historically?

If you are looking for the best debt consolidation loan rates, then you may want to look into obtaining a personal loan from the online lender LightStream. LightStream can offer rates as low as 3.49%, or 2.49% when you enroll in autopay for your personal loan payments.
LightStream does offer some of the lowest rates with the best incentives, however, they do have some of the highest minimum qualification requirements. In order to qualify for a LightStream personal debt consolidation loan, borrowers should have a minimum credit score of 660 and a minimum income of at least $50,000/year.
Joint loans are available for borrowers who may not qualify on their own, who are looking for larger loan amounts, or who are looking for the lowest interest rates possible. Loans are available with terms between 24 and 84 months.

Pros:

Low rates for personal debt consolidation loans

Zero fees. (Origination, late, early pay-off)

Larger loan amounts and longer terms are available to those who need it

Cons:

Harder to qualify

No pre approval process on the website

At Acorn Finance, you can access debt consolidation loan offers from lenders such as LightStream and their top competitors. Your credit will not be impacted by checking offers at Acorn Finance.

Should you choose the debt consolidation loan with the lowest interest rate?

The debt consolidation loan with the lowest interest rate may not be the cheapest loan. When comparing debt consolidation loan offers you will want to pay attention to total loan costs. There may be transfer fees or other fees associated with the loan. In addition, the term can also impact the total loan cost. While a low interest rate is a positive and is important, there are several factors you want to consider.
Whenever you are choosing to go through debt consolidation, the main idea is to consolidate higher-interest debt onto a longer-term lower-interest consolidation loan. It would not make much sense to consolidate debt onto a higher interest consolidation loan. By combining all of your higher-interest credit cards and loans onto a lower-interest personal consolidation loan, the idea is to help yourself save money on interest charges over time. However, if you extend the term of the consolidation loan and stretch it out over a longer period of time, you may end up paying the same or higher interest. This may be a worthwhile exchange if it means lower monthly payments and lowers your debt utilization ratio.

How does credit score affect debt consolidation loan rates?

Credit scores heavily influence what kind of interest rates and fees someone seeking a personal debt consolidation loan may face. Borrowers with lower credit scores will most likely not only have trouble qualifying for personal debt consolidation loans in the first place, if they do qualify, they most likely will need to pay the highest interest rates on the lending market. In addition to higher interest rates, they may be subject to higher additional fees. Borrowers with higher credit scores may enjoy some of the lower interest rates available as well as may not be subject to certain fees like an origination fee or early pay-off penalty.

Will the loan term affect the debt consolidation loan rate?

When it comes to loan terms, it is generally accepted that the shorter the term of the loan, the lower the interest rate may be. The longer the loan term, the higher the interest rate may be. Loans with longer terms often do come with higher interest rates, but they also come with lower monthly payments. Lower monthly payments make larger loan amounts more accessible to people so they can afford larger expenses like extensive home renovations, vehicle purchases, and out-of-pocket medical expenses.

What is the average debt consolidation loan rate for bad credit?

The average debt consolidation rate for bad credit historically (300 to 629) was estimated to be around 25.3%.

What is the average debt consolidation loan rate for fair credit?

The average debt consolidation rate for fair credit historically (630 to 689) was estimated to be around 20.5%.

What is the average debt consolidation loan rate for good credit?

The average debt consolidation rate for good credit historically (690 to 719) was estimated to be around 15.5%.

What is the average debt consolidation loan rate for excellent credit?

The average debt consolidation rate for excellent credit historically ( 720 to 850) was estimated to be around 11.2%.

How does the debt-to-income ratio affect debt consolidation loan rates?

Having a high debt-to-income ratio makes it difficult to find a debt consolidation loan, which is one of the ways you may be trying to fix your debt-to-income ratio in the first place. If you can qualify for a personal debt consolidation loan with a high DTI, you may be subject to higher interest rates and most likely an origination fee, depending on your credit score.

Are debt consolidation loan rates fixed or variable?

Debt consolidation loans are either secured or unsecured personal loans. Both secured and unsecured personal loans most often come with fixed interest rates. When it comes to personal loans, fixed interest rates are almost always preferred and they are beneficial to both the borrower and the lender. The reason is, when you have a fixed interest rate, you can know that if every payment is made on time and in full, that the loan will be paid at the end of the loan term. Additionally, having a fixed interest rate on a personal consolidation loan will give you a consistent monthly payment that you can properly budget for each month. Variable interest rates can create uncertainty, especially when it comes to budgeting.

Are there fees and penalties for debt consolidation loans?

Fees and penalties are determined by each individual lender. Some lenders may offer zero fees, while others may have incredibly high fees. The three most common types of fees or penalties are the origination fee, late fee, and early pay-off fee. If you have poor credit, the likelihood that you are going to be able to qualify for a loan without an origination fee is small.
Depending on the lender, origination fees can be as little as 0.5% or as high as 10% depending on what state you live in. Each state has different laws and regulations that put caps on origination fees. Late fees are fairly common amongst most lenders unless they explicitly state they offer zero-fee personal loans. Late fees can typically be between $25 and $50 or 3% to 5% of the monthly payment. When it comes to early pay-off penalties, these are slowly being phased out of the lending market, however, early pay-off penalties can be up to 2% of the loan balance if the loan is paid off within the first two years, and 1% after year three.

What are the advantages of debt consolidation?

Maybe you have recently seen a certified debt counselor, or maybe you have come to this conclusion on your own, but you now realize that debt consolidation is the right move to help you get your financial affairs in order and to start the process of getting yourself out of debt. You may even do some significant good for your credit score in the process. There are many advantages to debt consolidation that you may want to be aware of before starting the process.
Simplification: Having multiple debt payments each month to pay to so many different lenders to keep track of can be exhausting. When you take on a debt consolidation loan, you can combine all those different monthly payments into one simple payment. You could even enroll in autopay and further simplify your financial life.
Lower interest: Ideally, you should be taking higher-interest credit cards and loans and putting them onto a lower interest debt consolidation loan. This should hopefully save you money in the long run unless you choose a consolidation loan with an extended loan term. An extended loan term, however, can help you secure a lower monthly payment.
Defined pay-off date: When you have revolving lines of credit like a credit card or a personal line of credit, there is no defined pay-off date where you know when the debt will be wiped clean. By consolidating revolving lines of credit onto a fixed-rate consolidation loan, you can know exactly when your debt will be paid in full.

These are just a few of the many advantages debt consolidation can provide. If you have excessive debt, it may be wise to consult a certified debt counselor before making any big financial decisions.

What are the disadvantages of debt consolidation?

As there are typically more advantages than disadvantages when it comes to debt consolidation, there are a few downsides that you should be aware of before making a decision.
You may not get a lower rate: If you are seeking debt consolidation at a point where your credit score has fallen dramatically when compared to when you last applied for a line of credit, you may not find consolidation loans that come with a lower rate than your current debts.
Take on more debt: If you use a personal consolidation loan to pay off all your credit card debt but then you start using your credit cards again, it can make matters even worse.
Upfront costs: New lines of credit can come with origination fees or balance transfer fees that pile on the amount of money you already owe.

There are many advantages to debt consolidation but you need to consider the downsides as well. Debt consolidation can be a powerful tool to help people get their financial life back together.

Can you prequalify for a debt consolidation loan?

Just like any other loan, you should start by getting prequalified for a debt consolidation loan. When you prequalify for a loan your credit should not be affected. Lenders typically do a soft credit pull to generate an offer. If you choose to move forward with the offer they may request documentation such as identification, proof of income, and so forth. Once details are verified the lender can generate an approval and move forward with funding your loan. During the pre qualification process it's very important to submit accurate information that you can prove. For example, you should not estimate your monthly income but rather get your last few paystubs and determine what amount is most accurate to submit. In the event the lender requests proof of income, your documentation will match what you submitted. This should help the process be smoother. If you are looking to compare debt consolidation loan offers you should check offers at Acorn Finance. Within 60 seconds or less you can receive multiple personalized offers without impacting your credit score.