You may have heard the term “debt consolidation” or have heard someone mention a “debt consolidation loan” or “loans for credit card debt,” but what exactly are these things, and how does a debt consolidation loan work?
In short, a debt consolidation loan does what it sounds like it would – it consolidates your debts from multiple sources into one source with one monthly payment and one interest rate.
How it Works
Most debt consolidation loans are loans with a fixed rate, meaning that the interest rate never changes and you make one predictable payment every month. Before signing up for a debt consolidation loan, you will be told the interest rate and what your monthly payment will be.
For example, if you have four credit cards that each have different interest rates and minimum payments, you could use a debt consolidation loan to pay off the debt on each of those credit cards. This debt consolidation loan gives you just one monthly payment to manage instead of four. Debt consolidation can also potentially save you money on interest rates in the long run. To compare how much money you will save on interest from one debt consolidation loan versus paying interest on multiple outstanding debts, use a free online interest calculator.
Once you’re approved for a debt consolidation loan from the lender of your choice, the lender may disburse your loan funds to your creditors or the lender can send the funds directly to you. Make sure the original debts are paid off, then begin paying off this new loan. Consider setting up automatic payments or use reminders to make on-time payments every month. Over time, you’ll be able to pay back this debt consolidation loan and be debt-free.
Related: How To Get A Loan With Bad Credit
When Debt Consolidation Loans are a Good Idea
If you’re looking to save money on interest, streamline your monthly payments, and cross multiple payment dates off of your calendar, then debt consolidation may be a good fit for you.
Debt consolidation loans will help you pay down debt quicker. If you just continue to make the minimum payment on each of your credit cards, these payments can stretch out your repayment timeline for years. A debt consolidation loan may put you on a faster track to payoff, and you will have to deal with just one interest rate.
Debt consolidation loans will also simplify your monthly payments–it’s easier to manage one monthly payment than multiple payments, each with different due dates. This reduces your chances of missing payments, and missed payments could further hurt your credit.
No matter how much debt you have from multiple sources, you can repay it on a fixed schedule with a debt consolidation loan.
Let Lendah Help You Find the Best Option!
If you’re looking for a long-term fix that will save you money, it’s time to apply for a debt consolidation loan. Lendah has a network of over 30 lenders – we’ll help you find the best option for your financial needs. You decide the terms on a consolidation loan, so you can pay off your debt at a rate that your monthly income can handle. Overall, the average interest rate for a personal loan is lower than the rates from credit card companies. Once approved for a loan, you’ll save time and money as you manage one payment each month – a payment that you can afford.
Let the specialists at Lendah find a customized consolidation loan option for you. It only takes one application to find your options for the best unsecured loans.
If you have questions about debt consolidation loans, speak to our team of knowledgeable professionals. Our compassionate loan matchmakers will find the best terms tailored to your unique situation with fast approval and rates starting as low as 3.84% for amounts up to $100,000.
Get started today on our website. Prefer to talk in person? Call us at 833-453-6324 and we’ll get you connected immediately with one of our loan experts.