How to build credit score Safe personal loans Low-interest personal loans with APR Starting As Low As 3.49%

Personal Loans for debt consolidation - Good Credit

Most American borrowers are caught up in a recurrent debt cycle. That’s especially because of multiple debts, most of which are often overdue and accompanied by high penalties.


Credit card debts are the most common. Being caught up in this cycle is not only expensive but also severely hurts your credit score. However, this is not a hopeless situation, and you can still bounce back.


Debt consolidation will help integrate different debts into a single loan you can pay off with more friendly terms. In this article, we’ll point you to the best lenders for personal loans for debt consolidation for a good credit score. Take a look;

  • Rep APR
  • Term
  • Max loan limit
  • 6.99%-19.99%
  • three to six years
  • $3,500 - $40,000
  • 6.99%-24.99%
  • 36-84 months
  • $2,500-$35,000
  • 5.99%-24.99%
  • 24-60 months
  • $5,000-$40,000
  • APR range
  • Fees
  • Terms
  • Amounth
  • Unemployment protection
Bank 1
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 2
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 3
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No

Table of Contents

How does debt consolidation work?

Consolidation means applying for loans against the amounts you owe on debts. A larger percentage of this always consists of credit card debts. Once approved, you’ll then proceed to use the funds to offset your existing debts.


Apart from credit card debts, you can also consolidate payday loans, personal loans, and even medical bills. 


Lenders can either send the money to your account or directly to your existing creditors. You’ll then remain with one loan that’ll you’ll be repaying monthly. This not only gets you organized but also acts as a way of bringing together all your debts so you hardly miss out on a repayment.


So, with consolidation, you basically combine these high-interest debts into a single debt with lower interest.


If approached and managed responsibly, consolidation is an excellent way to cut costs on interests and repay your loans faster. 


These loans often come with fixed terms to keep you determined to repay your loan faster. They are also mostly unsecured. So you don’t need to risk your house, car, or any other valuable asset by offering it as collateral. 


A practical debt repayment plan is also crucial when going for debt consolidation. That will help you stick to the repayment plan and avoid sinking deeper into debts.

Hot Tip:

You should only consider going for debt consolidation if you have several high-interest loans. 

Requirements to qualify

Like a typical loan product, each lender lays down the requirement each borrower must meet to qualify for consolidation. 


Good credit is a common requirement. A borrower with a credit score of at least 600 can qualify for personal loans for debt consolidation. However, even lenders with poor and bad credit scores can also qualify.


However, borrowers with bad credit scores may part with higher interest rates and unfriendly loan terms. Such borrowers may consider throwing in a co-signer with good credit to act in good faith. 


Having a co-signer with good credit earns your credit a good image. However, they also share the responsibility should you fail to repay your loan. This may lead to a damaged relationship with your co-signor. 


Other basic requirements each lender asks for include legally residing in the US at the time of application.


 A borrower must also have attained the legal age, usually 18 years. Upon providing this information, a lender will ask for an ID, travel passport, or valid driving license for verification.  


Take your time to shop around for lenders whose policies and rates conform with your savings goals. Once you find one, go over their policies and requirements then proceed to submit a formal application. 


Such things as bankruptcies, tax liens, repossessions, and foreclosures in your credit history might also deny you debt consolidation loans with most lenders. 


You also need to show a functional bank account to your lender. Much focus will be drawn to your annual income and income-to-debt ratio. 


A high debt-to-income ratio is an indicator that much of your income goes to repaying loans. this might make lenders lose faith in your ability to repay your loan, thereby denying you consolidation.

Hot Tip:

Additional personal details like name, residential address, and social security number will also come in handy. 

When getting a debt consolidation makes sense?

Debt consolidation is a shot worth considering by borrowers looking to simplify their bills and offset their existing debts faster. 


Debt consolidation loans will bring all your existing debts under one roof. And, at the same time reward you with flexible monthly repayment terms so you keep up with the payments.


Debt consolidation is also a worthy course when you have a good credit score. Such will win you approval with most lenders easily. More, you’ll also likely have more flexible terms. And even more, you’ll get lower rates – lower than that of your existing debts.


Debt consolidation will also make sense to borrowers who are not looking to go the home equity way. Using your home as equity for your unsecured loans, though could grant you better loan terms, puts in the risk of losing your property.


If you are also looking to boost your credit score, debt consolidation loans can come in handy. Such loans will lower your credit utilization ratio. Low credit utilization boosts your credit score.

Pros and cons

Pros Cons
Simplified finances – debt consolidation loans come with predetermined loan terms, which are mostly flexible. Such makes budgeting easier and repaying your existing bills even easier
Variable credit card debt rates – credit card debt monthly repayments are not fixed. They vary based on the debt balance. Such makes them expensive. Plus, you’ll have a hard time getting out of debts. And should you extend your repayment period, you’ll end up paying even higher rates.
Integrates your debts – bringing your loans together and repaying them as a single debt is the whole idea behind consolidation loans. doing so helps in budgeting and organizing your funds. You’ll, therefore, keep track of your repayments, and avoid the consequences of late or missed repayments.
A single late repayment or chargeback on your credit card debt repayment history can pull down your credit score and mess up your credit history.
Fixed interests and repayments – since your monthly repayment amount is constant, you’ll easily budget your funds. You’ll also easily plan your finances.
Ability to borrow more loans – Repaying your existing loans will likely make you eligible for new loan products. Falling for this trap without a practical repayment plan will likely leave you with an even worse credit history
Boosts your credit score – paying off all your existing loans with consolidation loans will have your lenders positively updating your credit profile. The new debt will also lower your credit utilization ratio hence boosting your credit score.

What are the average debt consolidation loan rates?

Debt consolidation will only make sense if the loan borrowed has a lower interest than your existing debts. 


Each lender has different considerations when setting their respective rates. And, they have online tools on their site to help calculate your expected rates and monthly repayments.


Your ability to repay your loan (based on your income and debt-to-income ratio) and credit history play a major role when working out your expected rates. 


Vet different lenders based on what they charge as the interest rate and settle for the one with the lowest rate. You can use prequalification to compare lender rates without harming your credit score.


Debt consolidation loans generally come in two forms – fixed-rate and variable-rate debt consolidation loans. fixed-rate loans have their interests remaining the same throughout the life of the loan. Variable, on the other hand, changes according to changes in the market. 


You’ll therefore choose what best aligns with your financial goals. 

Tips for manage debt consolidation

Debt consolidation is an excellent way to clear your debts, boost your credit score, and save on interests. However, mismanaging debt consolidation loans can have you sink deeper into an endless debt cycle. Here are a few hands-on tips for managing debt consolidation;


  • Identify your total debts – clearly outline your current lenders, how much you owe them, their total interests and when they are due. Doing this will give a clear picture of your loan status before deciding whether or not to go for debt consolidation. While at it, you can also calculate your debt-to-income ratio so you can have a clear figure of how much of your income you’re using to repay your debts.


  • Go for low-interest debt consolidation loans – the idea is to save on interests. It wouldn’t make sense if your debt consolidation loan has a higher interest than your existing debts. Therefore, only go for debt consolidation loans if the interests are lower than those of your existing debts.


  • Have a fallback plan – work towards building an emergency fund. This should help repay your new debt without digging into your savings should anything happen to your income. This will help you stick to your repayment schedule. Hence, you’ll avoid late-repayment penalties and effects of the same on your credit profile.


  • Avoid taking in new loans – debt consolidation loans will pay off all your existing loans. that will, therefore, make you eligible to even more loan products. However, that’s not reason enough to take. Avoid any loans, at least until you’ve cleared the new loan. 

Alternatives to debt consolidation loans for good credit

For borrowers who don’t wish to take the consolidation route, the following are the viable options worth considering;


  • Home equity – using your home equity is a popular way of servicing your debts. These loan products, plus lines of credit often help borrowers get lower interests. Since you offer your house as collateral, the loan becomes less risky to lenders hence rewarding you with flexible terms and lower rates. Please note that you could lose your property should you go against the lender agreement through such things as missed repayments. 


  • Debt relief services – these are offered by debt settlement companies. For those who don’t qualify for consolidation loans, this option will especially come in handy. Here, the debt settlement company reaches out to your lenders to have you pay off your loans in a cheaper way. They, therefore, negotiate your fees to what you can comfortably settle. They, however, tend to charge higher fees and could prove even more expensive in the long run. Properly go over their policies and fees charged before signing up with them. Also, look for customer reviews and other crucial details. While at it, vet different companies and settle for the best.


  • Credit counseling – if none of the above options seem viable, then you could give credit counseling a shot. These mainly aim at taking you out of hopeless debt situations. Most credit counseling companies are non-profit making. They also offer Debt Management Plan services. DMP is where you offer them a single large payment then they divide the same to different creditors. They’ll also negotiate lower rates and flexible repayment terms with an aim of helping you clear your debt obligations faster. For this, you’ll part with a one-off payment of between $30 and $50. They’ll also charge you between $20 and $75 monthly DMP fees. The whole process usually takes three to five years.

Frequently Asked Questions (FAQ)

Debt consolidation with personal loans is a smart move if your new loan has lower rates and more favorable terms compared to your existing debts. Anything out of this scope will either prove more expensive or more demanding in the long run.

No. On the contrary, debt consolidation loans will likely help boost your credit score. Repaying all your loans at once lowers your debt-to-income ratio, a crucial consideration for most credit agencies.

It will likely take you between 12 to 24 months to boost your score after the successful repayment of your last credit.

Debt consolidation will stay for as long as the individual accounts are reported, usually 7 years from the settlement date.

Fees, higher rates, and loss of property offered as collateral are the popular consolidation risks.

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