Everything You Need To Know

To apply for a debt consolidation loan, you submit the amount of your existing debts. Upon approval, you combine all those debts into a single new loan. This can save you time and money by lowering the interest rate and monthly payments. By making your outstanding debt easier to manage, you are also in a better position to pay it off in a shorter amount of time.

Most debt consolidation loans come at a fixed interest rate. So, you pay the same amount every month until the loan is paid off. Let’s say you have four credit cards from four different banks, all at varying interest rates. You could use a debt consolidation loan to pay off those cards and have just one loan to manage instead of four. Simple, right? Just be sure the new loan offers a lower interest rate than the average of your current credit card lenders.

How Does Debt Consolidation Work?

Since most lenders require a minimum credit score of 670, not everyone qualifies. Even if you are over 670, a negative payment history could spoil your chances for approval.

Debt consolidation loans for good credit scores

Consolidating three credit cards into one low-interest loan

Tip: If you have a good credit score, you can find a company that doesn’t charge an origination fee.

Debt consolidation loans for bad credit scores

If you don’t have a minimum credit score of 670, your interest rate would be too high for a debt consolidation loan to make financial sense. A low credit score is riskier to lenders, so they charge more fees and higher interest rates to compensate for that risk.

Without good credit, you can expect to pay a 1% to 5% origination fee. Plus, you could be charged interest rates anywhere from 29.95% to 35.99% or even higher.

If you don’t meet the qualifications for debt consolidation, National Debt Relief offers many other debt relief options and can help find the one that is right for you.

When Is Debt Consolidation A Good Option?

If you have a credit score of 670 or higher and don’t like tracking every expense and bill payment, you might want to consider debt consolidation. By paying a lower monthly payment and interest rate, you will enjoy a bit of breathing room with your finances.

When considering debt consolidation, what matters most to you

Spending Less Every Month19.8%

Getting Back on Track30.8%

Resolving your debt for less than the full amount16.1%

Finding the fastest debt relief plan16.6%

Being in a program that makes things simple 6.3%

Avoiding bankruptcy 10.4%

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When Is Debt Consolidation A Poor Option?

Consolidation is not doing its job if you don’t lower the interest rate on your new loan. Making your debts more manageable by combining them into one loan would be the only benefit, and other debt relief options do that and more.

If your credit score is lower than when you took out your credit cards, finding a rate that makes consolidation worth the effort will be difficult. Check your credit score before considering your options since it plays a crucial role in your eligibility for most debt relief plans.

Making large purchases

If you are in the market for a house or car, your credit score means everything. Taking out a debt consolidation loan or a line of credit requires a hard credit pull, which will lower your credit score by 5 to 10 points. If your score is already low, losing even a few points will work against you.

Tip: Debt consolidation is a temporary solution to a long-term spending issue. Addressing how you landed in debt and changing your habits are key for future financial success.

Be aware of up-front costs

It’s important to consider every cost when determining if a debt consolidation loan will save you money. Depending on the lender, you could pay hundreds if not thousands in late and early repayment fees. While including these fees may still cost less than your current debt, it is important they are considered.

Don’t pay a higher interest rate

Your debt consolidation loan could charge a higher rate than what you are currently paying on your debt. This could happen for a variety of reasons, such as your current credit score. Additional reasons you might pay more in interest include the loan amount and the loan term. Extending your loan term could lower your monthly payment, but you may end up paying more interest in the end.

Tip: Consolidation does not always reduce the interest rate on your debt, particularly if your credit score is under 670.

Missing payments will set you back even further

If you miss a monthly loan payment, you will likely be charged a late fee. In addition, if a payment is returned due to insufficient funds, some lenders will charge a returned payment fee. These fees can greatly increase your borrowing costs. Since lenders typically report a late payment to the credit bureaus after it becomes 30 days past due, your credit score can suffer. This can make it harder for you to qualify for future loans and get a lower interest rate. To reduce your chances of missing a payment, enroll in the lender’s automatic payment program if they have one.

Tip: If the total of your debts is more than half your income, you would probably be better off with debt relief. National Debt Relief can go over all your options to determine which one is right for you.

Criteria For Debt Consolidation Loans

Tip: The best debt consolidation loan will reduce the interest rates you are currently paying and lower your monthly payment.

Types Of Debt Consolidation Loans

How National Debt Relief Works

During your free consultation, a debt coach will determine a timeline and your monthly payment amount to settle your debts. Most clients become debt free in as little as 24-48 months. You will immediately begin depositing that monthly payment into an FDIC-insured dedicated savings account in your name.

Once a debt has been settled, we will contact you for approval and ask that you release the funds. If you lack the money to settle all your debts, we offer a payment program that enables you to make just one monthly payment to National Debt Relief. As the funds build up, we use the money to pay your creditors.

Tip: Your success in the program depends on making on-time monthly payments

National Debt Relief is accredited with an A+ rating by the Better Business Bureau and belongs to the American Association for Debt Resolution — the watchdog of the debt settlement business. To be a member of this Council, we pledged to treat our clients with transparency, honesty, ethics, and fairness.

To learn more about how National Debt Relief can help you take back your life, call 800-300-9550 or complete the no-obligation debt consultation form today. We promise to support you every step of the way, just like we have done for over 500,000 people across the country.

To apply for a debt consolidation loan, you submit the amount of your existing debts. Upon approval, you combine all those debts into a single new loan. This can save you time and money by lowering the interest rate and monthly payments. By making your outstanding debt easier to manage, you are also in a better position to pay it off in a shorter amount of time.