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Best Debt Consolidation Companies
We all have debt that needs to be paid off. Whether they’re accumulated from shopping, car payments, or college tuition, the debt on these loans could easily add up quickly. Managing debt can be daunting due to the sheer amount of varying interest rates – not to mention juggling bills from different companies.
What if paying back loans was cheaper and easier? Is there a way to get out of your drowning debt? How do debt consolidation companies work?
Let’s find out what types there are and if they’re right for you.
What Is Debt Consolidation Anyway?
Say you owe $5000 in department store loans with an APR of 28%. Your auto loan is $400 a month with a 7% APR. On top of these, you also have a student loan bill amounting to around $300 a month with a 3% interest rate per year.
If all of these numbers make you dizzy, don’t worry you can consolidate all of these debts into a single larger loan to make your life easier. Debt consolidation also makes it possible to have a single bill every month while being able to have lower monthly payments in some cases.
However, if you only want to address one loan with a huge monthly bill, then you can instead opt for debt settlement. Debt settlement is an agreement between the borrower and lender to settle on a large loan with many bills, with a one-time payment.
For example, if you owe $10,000 on your credit card, you can negotiate with the creditor to forgive the remaining debt if you paid a lump sum of $5000.
Be careful though because debt settlements typically affect your credit score negatively.
Related content: Free student loan debt calculator spreadsheet
Different Types Of Debt Consolidation
Everyone’s debt situation is different so the ways to go about managing them will vary. Luckily, there are a few methods to choose from to get you on your way out of debt.
Transferring Balances To Single Card
If you have multiple credit cards with each having varying interest rates, you can benefit if you transferred all of those balances to a single credit card with a zero or low interest rate.
You’ll want to do this if you have several small debts that you can pay off completely within a year. Look for a credit card that has a high credit limit and 0% introductory interest rates for the first year.
Note that balance transfers are usually exempt from any promotional rewards that the new card company may offer.
Related content: Free credit card debt payoff printable
Taking Out Unsecured Loans
Debt consolidation loans can be taken out to help lower the number of bills into a single one. Interest rates on these loans are typically high because they’re unsecured, which means they’re not backed by any assets as collateral.
Lenders will look at your credit score and history to determine eligibility. Personal loans work similarly but the difference is that they can also be used for personal expenses in addition to addressing debts.
Some lenders will ask what the purpose of the loan is, and depending on your answer, there may be restrictions on its use or differences in interest rates.
Taking Out Secured Loans
If you have assets that you can use as collateral, lenders will be happy to offer you lower rates. The most common types of secured loans include home equity, vehicle, and secured credit cards.
When you take out a mortgage loan, your house acts as collateral. If you don’t pay back the secured loan your house can be foreclosed.
Vehicle loans work in the same way where your automobile, boat, or motorcycle can be used as collateral.
Secured credit cards work differently in that an asset isn’t used as collateral. However, a cash deposit is required instead. If the monthly bill isn’t paid, the cash deposit can be withdrawn and applied towards the bill.
Related content: Free debt snowball worksheet
Is Debt Consolidation A Good Idea?
Debt consolidation can help lower your stress and reduce the anxiety from managing multiple bills. It’s a good idea if you want to simplify your bills while lowering your interest rates.
Remember, the balance won’t get lowered unless you settle each loan as mentioned before. Make sure you have the right reasons for consolidating debt.
Let’s take a look at the good and the bad when it comes to debt consolidation:
- Streamlining your debts all in one loan makes it easy to manage as compared to having multiple bills.
- A lower single interest rate is better than having many variable interest rates and in most cases, this will cost less.
- Your credit score can be improved by lowering utilization rates on your credit cards. Credit scores will be negatively affected if utilization is above 30%. Paying off regular payments on your debt consolidation loan can help your score improve overtime as well.
- Hidden costs usually come with debt consolidation in the form of fees (ie. Origination, balance transfer, closing costs, annual).
- You’ll pay more in interest if your credit score isn’t high enough or if you don’t have assets to back up as collateral. The term length will also determine if you’ll be spending more on interest or not.
- It doesn’t solve the underlying issues that caused you to be ‘drowning in debt’ in the first place. Consolidating doesn’t teach you how to budget or manage your finances better. It doesn’t change your habits – only you can do that.
Debt Consolidation Companies (BBB Accredited)
Ever heard of Zagat-rated restaurants? Businesses have something similar called a BBB rating. The Better Business Bureau gives ratings based on quality and trustworthiness to businesses that apply.
Not all debt consolidation companies are BBB accredited or even rated but that shouldn’t deter you from checking them out.
Take a look at the top list of the best debt consolidation companies below to help you get started.
The Top 5 Debt Consolidation Companies
What are the best debt consolidation companies? Let’s look at the top 5 debt consolidation companies in the sections below.
If you’re looking to consolidate your loan through a personal loan, look no further than LightStream which has an A+ BBB rating.
With APR being amongst the lowest in the industry starting at 4.49%, you can take out loans as long as your credit score is at least 660.
Loan amounts start at $5000 and go all the way up to $100,000. The APR will increase proportionally to the loan amount going up to 20.49%.
Curadebt has been in the debt settlement game since 2000. The minimum debt you need is $5000 which is amongst the lower side.
Fees are standard fare hovering at 20% of the total enrolled. Ratings are overall positive but you should know that they are not BBB accredited.
National Debt Relief
National Debt Relief offers fees as low as 15% but can go up to 25% of the total enrolled debt. Its lower fees can come at a cost though with its minimum debt starting at $7500.
They’re also BBB accredited and highly rated with an A+ so you can rest assured that you’ll have excellent customer service when it comes to debt settlement.
Discover Home Loans
Did you know Discover’s low credit card interest rates can also be found on their home equity loans? You can be eligible for fixed rates as low a 4.15% going up to 11.99% APR.
They don’t charge application fees, mortgage taxes, or appraisal costs either. It doesn’t come as a surprise that Discover has the highest BBB rating with an A+.
Discover it Balance Transfer
Being mentioned twice on any type of list is a huge accomplishment and there’s good reason for it. The APR is set at 11.99% which is the lowest amongst the popular balance transfer cards.
Annual fees are non-existent as well. With a big name with such great rates, Discover should be your first stop for when you want to transfer multiple credit card balances to a single one that saves.
What is the best debt consolidation company?
The best debt consolidation company is the one that suits your specific needs. It would be wise to talk to a few of these companies to get a feel for who you think would offer you the best service. Most of them offer free consultations so you really have nothing to lose.
So, what is the best debt consolidation company to use?
Some of the top debt consolidation companies are:
Consolidating Your Choices
There are plenty of types to choose from when it comes to debt consolidation. Choosing the right one depends on several factors.
If you want to lower your debt then look into debt settlement. If you want to lower the interest rates but keep the debt balance, you’ll need to look into debt consolidation. The interest rates will vary by company but the biggest aspect is whether it’s a secured or unsecured loan.
No matter which situation you’re in, know that you have options. Do your research though because you don’t want to be paying for more in the long run.