Cobalt Advisors and Credit 9 have joined Saxton Associates and Hornet Partners in flooding the market with debt consolidation and personal loan offers in the mail. The problem is that the terms and conditions are at the very least confusing, and possibly even suspect. The interest rates are so low that you would have to have near-perfect credit to be approved for one of their offers. Best 2019 Reviews, the personal finance review site, has been following Carina Advisors (also known as Corey Advisors, Pennon Partners, Jayhawk Advisors, Clay Advisors, Colony Associates, and Pine Advisors, etc.).
Paying off debt can be overwhelming if you’ve got multiple lenders and creditors with high-interest rates. If you want to make the process easier, consider getting a debt consolidation with a personal loan.
It’s easier to lose track of multiple outstanding debts with different, often confusing due dates, minimum amounts due, and interest rates. Missing a single payment can hurt your credit score and reduce your chances of borrowing money in the future. Debt consolidation with a personal loan can deal with multiple accounts in one go by converting them into a single monthly bill.
You can simplify your financial life, keep your credit going strong, and easily repay what you owe every month.
All You Need to Know About Debt Consolidation with a Personal Loan
Debt consolidation with a personal loan is when you get a personal loan to repay a debt on your credit cards and or other debt. It rolls up all your debt into a single payment until it’s paid off. People with high-interest rates, such as those on credit card debt, are good candidates for debt consolidation with a personal loan. You may qualify for a personal loan if:
- You have a good credit score: As a general rule, the better your credit, the easier it is to qualify for a loan at the lowest possible interest rate. Your goal should be to secure low-interest rates to ensure you pay less on top of the borrowed money.
- You have a large amount of debt: if you have significant amounts of debt but you’re able to cover the bare minimum in terms of monthly payments, you will qualify for personal loans.
- You have control over your expenditures: A personal loan is certainly not going to be of much use if you are a spendthrift. It could get you in more debt when everything is said and done. Make sure to review your finances before signing up with a personal loan to make sure you can afford to take on the loan and pay off the outstanding debt.
You may still qualify for debt consolidation on a personal loan if you don’t have good credit, but the tradeoff is high-interest rates. If the interest rate on the new personal loan is higher than what you are currently paying, skip it or wait until you can get lower interest rates. If nothing works, look for alternative methods for settling your debt.
Pros of Debt Consolidation with a Personal Loan
There are many advantages of using personal loans for debt consolidation.
1. Lower Interest Rates
In general, personal loans tend to have some of the lowest interest rates than other types of debt, provided you qualify. You’ll be able to save a significant amount of cash on loan repayment.
2. Locked Low Rates
In most types of debts, the interest rates are variable if they are linked to a financial index. If the index rate increases, the interest rate also increases. If you’re not a big fan of variable interest rates, you can opt for fixed-rate interest loans to manage your monthly payments more efficiently.
3. Long Repayment Timelines
Most personal loans specify a strict schedule in your application. This means you’ll have an exact idea of when you’ll become debt-free provided you pay on time. It is worth noting that if you decide to clear off your loan early, your creditor might charge you a prepayment penalty.
4. Improve Your Credit Scores
If you’re unable to make good on outstanding credit card debt, you could hurt your credit score. This will reflect on your payment history, which is extremely important if you want to borrow money for big purchases in the future, such as a house or a car. Debt consolidation with a personal loan can help you improve your credit score thanks to on-time payments.
Cons of Debt Consolidation with a Personal Loan
Personal loans are not without their disadvantage. Make sure to take these into account before using personal loans in debt consolidation.
1. You May Have to Pay a Higher Rate
Personal loans can have the lowest interest rates and the highest interest rates. Which way the pendulum swings depends entirely on your particular circumstances and your lender.
2. You’ll Pay More Over a Long Period of Time
Even if you’re able to secure lower interest rates, there is a possibility that your personal loan may cost more if it is stretched out over a long repayment period.
3. You May End up with More Debt
Personal loans quickly help you pay off credit card debt. But if your spending pattern isn’t in check, you may end up using these credit cards to cover non-essential expenses. This means you’ll owe money to your original creditors and the personal loan. This could leave you in worse financial shape than before.
4. Secured Personal Loans
Some personal loans are secured against assets. In this case, your creditors could take the property if you don’t make good on your repayment plan. If you’re unable to pay the personal loan, you could lose your assets. However, they are good if you you need to finance quickly like if you’re behind on payments or if you can’t afford to get your car out of impound.
Alternative Ways to Consolidate Debt
If a debt consolidation with a personal loan isn’t working for you, there are alternative best ways to consolidate debt. These are as follows.
Balance Transfer Credit Cards
A balance transfer credit card is a particularly useful option if you have a lot of outstanding credit card balance. Most lenders offer 0% interest rates for a fixed period, usually ranging from 1 to 2 years. This is an efficient way to roll over all your outstanding credit card debt into a single manageable payment every month. This process may not work for you if you’ve accrued a lot of credit card debt.
Home Equity Loan
If you owe less on your mortgage than the total worth of the house, you can qualify for a home equity loan and use it to pay off outstanding debt. Home equity loans let you borrow against your equity in the home. The lump-sum money you receive from the home equity loan can be used to pay off all your outstanding debt. The monthly payment is then made to pay off the new loan.
Do keep in mind that your home is considered collateral and lenders will view this type of loan as less risky. This results in lower interest rates compared to unsecured loans, such as personal loans. That being said, if you fall behind on your payments, you could lose your home.
Debt Management Plans
If you don’t qualify for credit card transfer or personal loans, you’ll have to look for a different way to manage your debt. For starters, organize all your debt in a spreadsheet. Write down the names of every creditor you owe money to along with the monthly due date. Once you have everything written down, you can try debt management plans such as debt snowball and debt avalanche methods.
Wrapping Up
Debt consolidation with a personal loan is an effective method of paying off creditors but they have their pros and cons. Make sure you weigh them all to choose the best method for debt consolidation. Remember, there are alternatives out there.
