When used wisely, debt can be a valuable tool. The perks and rewards offered by some credit cards, for example, can give you a boost if used with discretion. The reality, though, is that it’s all too easy for debt to spiral out of control. In such cases, you may benefit from debt consolidation.
Here’s what the top debt consolidation companies have in common.
What Is Debt Consolidation?
If you’re struggling with debt, you are far from being alone. If you’re hunting for a strategy that could give you some relief, a debt consolidation loan could help.
Debt consolidation is a form of debt refinancing that involves taking out a loan to pay off other loans or lines of credit. Top debt consolidation companies like Bills.com can be counted upon to provide this service honestly and reliably.
Is It Like Debt Settlement?
The key difference between debt settlement and debt consolidation is the latter puts you in complete control. Meanwhile, you’ll hand over control of your finances to a counselor with debt settlement. Additionally, you’ll pay your debts in full with consolidation; while settlement looks to get a portion of your debt forgiven to make paying it off easier. However, along with this relief comes a pretty hard hit on your credit score.
Potential Benefits Of Debt Consolidation
Additional advantages of consolidation include potentially lower interest rates, particularly if you currently have the credit score to combine high-interest debts under better terms. You’ll also make a single monthly payment of the same amount, as opposed to making several monthly payments of varying amounts.
In addition, unlike some other lenders, debt consolidators often use additional information, over and above your credit score, to find the best rate for you. Those factors can include job history, level of education, and area of study.
What Kinds Of Debt Can Be Consolidated?
Debt consolidation loans can help you manage revolving credit lines and loans that come with high-interest fees. These kinds of debt can include credit cards of all types (retail, gas, etc.), and title and payday loans.
Must All Your Debt Be Consolidated?
Depending on the loan amount for which you’re eligible and the state in which you live, top consolidation companies can lend you up to around $50,000. However, you’ll control which obligations to roll into debt consolidation.
Will Consolidation Hurt My Credit?
Many top consolidation companies will only do a soft credit check that will not affect your credit score to see if you qualify. That makes it easier and less stressful to shop around. However, if you like a company’s loan rate and go ahead with the application, the firm will conduct a hard credit inquiry that will temporarily lower your score. Over the long haul, though, a consolidation loan can help you improve your credit if you make timely and consistent payments.
Pitfalls To Be Aware Of
Some debt consolidation companies will use a bait-and-switch tactic. That is, they’ll advertise a consolidation product but will try to move you toward settlement. You should also be mindful of “guarantees” and high-pressure tactics to sign up. Always trust your instincts and ask plenty of questions.
If I’m Approved, When Are Funds Available?
Top consolidation companies usually make funds available swiftly — often as soon as one business day — so that you can erase your highest-interest debts.
As with any debt relief remedy, there are pluses and minuses to debt consolidation. However, a consolidation loan can be a good fit for those who seek to simplify their debts or gain more time to eliminate their obligations.
Now that you know what the top debt consolidation companies have in common, you can save time and hopefully money, and set yourself on a path toward a better financial future.