Ultimate Guide to Debt Consolidation Loans

Everything you need to know about finding the right debt consolidation loan

You’re having trouble managing your debts. There are too many to keep them all straight. You have a house note, a car payment, five credit cards with one maxed out. Not to mention the student loan that you’re still paying.

If this sounds like your current situation, you may be the perfect candidate for a debt consolidation loan.

Bringing All Your Debt Together Under One Plan

The idea behind debt consolidation loans is to consolidate all your high-interest debts into one, easy-to-pay, and less-expensive loan. However, there are several ways for you to consolidate your debt.


Type of LoanDescriptionAdvantagesDisadvantages
Unsecured Consolidation LoanLoan without collateral such as a home or carUse it to pay off all kinds of debt, have one monthly payment, you don’t have to put any property at riskRequires a high credit score and good credit history, and interest rate may be higher
Vehicle RefinanceCommonly called title loansInterest rate is lower than unsecured loanYou place your auto at risk of repossession
HELOCHome Equity Line of CreditOne of the lowest interest rates possibleRequires a high credit score, low debt to income, and equity in your home; you turn unsecured debt into secured debt
Peer-to-Peer LendingPost a request for a loan online at a site that screens borrowers as well as organizes and collects the loanLower interest rates and easier to obtainGenerally geared toward small business borrowers
Credit Card Balance TransferUsing credit card checks to transfer several outstanding balances to one card0% or low interest for special offer periodTransfer fees usually apply along with high interest rates at end of promotion period


Be Debt Consolidation Loan Savvy

Before you decide whether a debt consolidation loan is right for you, be sure to do your homework. Start by:

·      Shopping around. Check with a variety of financial institutions and loan consolidation organizations to determine which offer the lowest interest rates and fees, easiest monthly payments, and best overall service.

·      Reviewing the cost. Getting a loan isn’t just about signing on the dotted line and walking away with a check. There may be additional fees or costs. Make sure you know what they are and that you can afford the loan.

·      Making sure it’s the right move. Consider how much you pay now versus how much you will pay with the new loan. If your payment on the debt consolidation loan isn’t less, it’s the wrong loan.

·      Checking out your credit report. Not only will this enable you to understand your credit problems and whether a debt consolidation loan can help, it allows you to determine that the information in your credit report is accurate.

·      Adding it all up. Before you decide, review your bills to determine how much you really owe. Determine how much of a loan you need. Be sure not to include bills with lower interest rates than the loan.

·      Planning our monthly budget. The only way to get out of debt is to make a commitment and have a plan. Compare your income and your expenditures to determine how this new loan will affect you and where you can cut back.

Using debt consolidation is a good way for those with several loans and/or high-interest revolving credit cards to get their debt under control. However, as with anything, never go into this process blindly. Do your research to make sure it is the best move for your particular situation.

Don’t Be Fooled by Scammers

The Consumer Financial Protection Bureau (CFPB), the federal agency that regulates consumer protection in the U.S., recently reported that consumers have reported receiving calls from people claiming to be from the CFPB. They offer debt consolidation services and ask for credit card information. Never give anyone you don’t know any personal information.

The CFPB does NOT offer debt consolidation services. The CFPB requests that if you receive any suspicious calls related to the CFPB, call them directly at (855) 411-CFPB to report it.



Take Control of Your Debt With Debt Consolidation

Discover your lowest eligible rate by comparing rates from multiple vetted lenders.

It’s quick, free, and won’t hurt your credit score.