Is taking a new loan ever the answer to crippling debt? Sometimes it is. Many personal loan lenders offer consolidation loans. A credit card consolidation loan allows you to consolidate debt and gain control over your finances again.
If you’re new to debt consolidation, don’t despair. You’ll find all you need to know in this guide to debt consolidation, with recommendations for the 8 best debt consolidation loans of 2024.
What Is a Debt Consolidation Loan?
A debt consolidation or credit card consolidation loan is a personal loan that allows you to pay off existing debt with a lump sum. They can cover everything from credit card debt to store account debt, other personal loans, vehicle payments, and mortgages.
Credit card debt is one of the most common forms of debt that can quickly escalate. Fortunately, a credit card consolidation loan can help.
How Do Debt Consolidation Loans Work?
A credit card consolidation loan, or any other type of consolidation loan, covers existing debt with one convenient payment.
You will typically need a direct deposit bank account, not only to receive the loan amount but also to make that monthly payment. You may even qualify for a direct deposit discount.
A consolidation lender will supply you with the amount needed to pay off your unsecured debts and loans. And then instead of paying all those creditors every month, you’ll pay the consolidation lender with one payment, instead.
Therefore, a consolidation loan turns several smaller debts into one, larger debt, equal to the total of those original debts.
Typical Loan Amounts and Terms
The consolidation loan amount you apply for will depend on how much debt you have.
Loan amounts usually range from $1,000 to $50,000. However, the most typical consolidation loan amounts range from $10,000 to $20,000. Both maximum and minimum loan amounts vary between lenders, so you’ll need an estimate of the amount you need, before applying.
Your loan amount will reflect your total debt that is being consolidated. Monthly payments will be debited directly from your bank account. This can be a savings or checking account, as long as it allows the automatic monthly deduction of your consolidation loan payments.
Consolidation loans usually feature repayment terms from two to seven years. Ultimately, the amount you’re borrowing and what you can afford to pay each month will determine the loan terms.
Standard Debt Consolidation Loan Interest Rates
Interest rates may differ from one consolidation loan option to the next, but the average debt consolidation loan interest rate is about 26.11%. The last thing you need is to switch from high-interest debt to a high-interest consolidation loan!
Fortunately, low-interest loans for debt consolidation are available. However, factors unique to each case, particularly the credit score, can have a major impact on the loan rate.
How Credit Score Impacts Loan Rates
Credit scores matter. Your business credit score impacts both your interest rate and the chances of approval of your business loan. Your personal score also influences the approval of a personal loan or credit card debt consolidation loan.
Make sure you’re aware of what the interest rate will be before accepting an offer of loan funding. Any type of loan, including a consolidation loan, will typically have higher interest rates for bad credit scores.
But there’s one more thing you need to know about interest rates. They can be fixed, or variable. A fixed-rate loan has a fixed (unchanging) interest rate throughout the life of the loan. On a variable-rate loan, the interest rate fluctuates according to changes in market interest rates.
Most debt consolidation loans feature annual percentage rates that are fixed, so you’ll pay the same every month. This is in stark contrast to the variable rates of most credit card debts. But even if fixed, your fate may be influenced by your credit score.
Credit Card Consolidation Loan Overview
If you’re struggling to cope with credit card debt, a credit card consolidation loan is the solution. The sooner you get help with managing your debt, the better.
Here are the eight best consolidation loans to consider.
E-Boost: Best Overall
E-Boost Partners is the best place to get any type of loan. It’s the first stop for small business consolidation loans, working capital, and lines of credit, too. Some of these loans carry rates as low as 0.5%.
E-Boost Partners makes loan applications fast and easy. You’ll get notified quickly if you’ve been approved, and funds are often paid out within 24 hours of approval.
E-Boost is not a lender, but a team of professional loan brokers and experts committed to helping small-to-medium-sized business owners get the funds they need. With E-Boost, you can rest assured that only legitimate and trustworthy lenders will be recommended to you.
SoFi: Best Loan Amount Range
A credit card debt consolidation loan from SoFi allows you to transfer high-interest credit card balances to a personal loan from $5K-$100K. SoFi offers one easy monthly payment with a reduced APR and no other fees. Choose their Direct Pay option, and SoFi will pay your creditors directly.
Besides consolidating debt, SoFi also offers other benefits with an eligible cash management account and is also an equal housing lender. This means they can issue mortgages and refinance mortgages.
Upgrade: Best for Fair Credit Consolidation
Although an excellent credit history and credit score make it easier to apply for a loan, consolidation loans for fair credit are also available.
With a debt consolidation loan from Upgrade, fair credit borrowers can consolidate their debt with loans of up to $50,000, and improve their credit history simultaneously.
Avant: Best for Improving Creditworthiness
Don’t despair if you have a lower credit score. Avant provides fixed-rate debt consolidation loans for all credit scores, including poor credit scores. Avant offers personal loans to use for debt consolidation from $2,000 up to $35,000. The loan terms range between 24 and 60 months.
Avant reports to multiple credit bureaus. So if you manage your loan repayments well, this can improve your creditworthiness.
Upstart: Best for Low Credit Score
It’s difficult enough to get credit with a limited credit history. So, what can you do if you have minimal credit history, but need a consolidation loan? Try Upstart, the best option for borrowers with limited credit history.
You can get an Upstart debt consolidation loan with a credit score minimum of just 300. That makes this one of the best debt consolidation loans for poor credit.
Jenius Bank: Best for No-Fee Consolidation
Jenius Bank gives personal loans with no extra fees that can be used for credit card debt consolidation. Jenius’s Personal Loan amounts range from $5,000 to $50,000 and fixed APRs from 9.49% to 23.49% (at the time of writing).
Your approved loan amount and term and credit profile, among other factors, will determine your APR within that range.
Citibank: Best for Borrowers with Excellent Credit
At CitiBank, you can apply for a personal loan to consolidate your debts. There’s no origination fee and you’ll have a fixed APR of between 11.49% and 20.49%. Your APR will be determined by several factors, including your credit score.
The lowest rate applies in cases of excellent credit, with a loan term of 24 or 36 months. But there are repayment terms of up to 60 months.
Reach Financial: Best for Customizable Funding
With Reach Financial, you’ll have access to quick funding with customizable monthly payment amounts. Personal loans range from $3,500 – $40,000 and can be used for debt consolidation. They offer flexible terms between 24 and 60 months, with APR rates from 5.99%-35.99%.
How to Get a Debt Consolidation Loan
Some, but certainly not all consolidation debt lenders are listed on the Better Business Bureau. Although this is a good place to start, you should do more comprehensive online research to find options that best meet your needs.
Select the Best Debt Consolidation Loan for Your Unique Needs
There are different types of debt consolidation loans and different debt consolidation lenders to choose from.
To make the selection that is right for you, consider the approval requirements, loan amounts, interest rates, and fees before making a decision. It’s a lot easier to get a debt consolidation loan with a good or even a fair credit score.
Getting a debt consolidation loan with bad credit is possible, although your options will be limited. If you have a low credit score, this should be the first thing you check when deciding on a consolidation lender — do they accept bad credit borrowers?
Practice Responsible Debt Consolidation
A debt consolidation loan allows you to pay off existing debts in one convenient payment. It can also save money, as consolidation lenders may offer you a more affordable monthly payment than you were previously paying for multiple debts.
However, don’t forget that meeting your debt payment obligations with a debt consolidation loan is as important as any other type of loan. Make your required monthly payment on time. And if you can make extra payments, do so. It will help you to pay off your loan early and get out of debt faster.
Debt Consolidation Loan Alternatives
Here are a few alternatives to conventional debt consolidation and credit card consolidation loans.
401(k) Loan
You can borrow money from your retirement savings, with a 401 (k) loan. Take note that this will have to be rapid, with interest, like any other loan. But you won’t need an exemplary credit history or high credit score. The maximum you may borrow is 50% of the 401 (k) balance, but never more than $50,000.
Note that a 401(k) loan could have significant tax implications if you fail to repay it on time.
Debt Management Plan
As with debt consolidation, a debt management plan lets you make a single monthly payment covering all of your unsecured debts. It’s not a loan, though, and won’t allow you to pay less than the original amounts you owe. You can get advice about a debt management plan from a consumer counseling agency.
Home Equity Loan
Home equity loans allow homeowners to borrow money against the equity in their homes. The equity is the difference between the property’s current market value and the homeowner’s mortgage balance. It is therefore a type of second mortgage you can use to pay off your other debts.
The Benefits of a Debt Consolidation Loan
With a credit card consolidation loan, you can enjoy the following benefits:
- You’ll have one convenient payment instead of multiple payments. This is much easier to manage and lets you feel in control of your finances.
- You may get a potential interest rate reduction. This means more of your payments will go to paying off debt, and less to interest on that debt.
- The total monthly payment is often lower than the previous total of separate payments. So you will find paying your debt easier, even on a tight budget.
- By collating all of your debt into one loan, you reduce the credit usage portion of your credit report. This can lead to an improved credit score.
How to Find a Debt Consolidation Loan with E-Boost
Are you looking for a debt consolidation or credit card consolidation loan for your small business? E-Boost partners can help. Term loans of 2-4 years can help you sort out your debt hassles or scale your business.
If you are unsure of what you need to manage your debts and get your small business back on track, speak to one of our representatives. Contact E-Boost Partners directly or book an appointment to get more information about the range of services on offer.
Conclusion
If you’re struggling to stay on track with debt repayments, you need a credit card consolidation loan.
A consolidation loan takes the pressure off with a lump sum to pay your debts. Instead of making multiple payments every month, you’ll just have one. And because some lenders offer lower interest rates for good credit, you could save money while mastering your debt.
E-Boost Partners is dedicated to helping small to medium business owners access the funding they need at competitive rates. Thanks to the simple application and approval process, your funding problems could soon be over.
Contact us today for more information.
FAQs
Not always. But if you are struggling to pay off multiple high-interest credit card debts, a credit card consolidation loan is a good idea. By consolidating credit card debt, your monthly payment will be simple and affordable. Similarly, if you have multiple mortgage or auto loans, a consolidation loan can help.
It can temporarily affect your credit usage history and credit score. Debt consolidation loan companies report to major credit bureaus. If you don’t make your payments on time, your credit score will suffer. However, a consolidation loan boosts your credit score by turning multiple debts into one.
The minimum credit score required for a debt consolidation or credit card consolidation loan is usually 650, but some lenders accept a credit score of 600 or lower. That said, a credit score of 700 and above is preferable if you want a competitive interest rate.
