What to Expect from Debt Consolidation

Consumers who search for debt relief are often hoping to find programs that promise to lower their debt quickly or help them settle, so they do not have to pay the full amount. However, most legitimate companies do not make these promises. Residents wondering how to consolidate debt may consider hiring a debt relief company, applying for a consolidation loan, home equity loan or 401(k) loan or applying for a balance transfer credit card. 

If you need help paying back your debt, then you may turn to a debt relief or credit repair company. If you simply need help organizing your finances and want to save on interest, then debt consolidation may be the better solution. A debt consolidation calculator may help you decide whether consolidating your debt is the best option. It will also give you an idea of how long it will take to become debt free. Ultimately, there are many debt consolidation plans available, which means you will have more options from which to choose.

Learn About Debt Consolidation Calculators

Using a debt consolidation calculator is often the first step in the consolidation process. A calculator will give you the information you need to organize all your debt into one place and develop a repayment plan. Most online calculators are free.

A debt consolidation loan calculator works when you enter your total amount of debt and other necessary information. To get accurate results, be sure to enter your most recent information and all the debt you owe. This includes personal loans, automotive loans and liens, credit card debt, student loans, medical debt and payday loans.

As you enter your debt information, you will be prompted to submit the current balance, interest rate or Annual Percentage Rate (APR), payment type and monthly payment amount for each line of credit. Once you are finished, the calculator will determine how much you may save with debt consolidation or how long it will take to pay off debt.

You may use one debt consolidation calculator or several to make sure that you are receiving accurate results. Remember to use caution when entering your personal information into a website. Note that certain calculators, such as the Discover calculator, will allow you to enter only a certain number of debts or credit lines. In addition, your calculation is only an estimate and may not be guaranteed.

An Explanation of Debt Consolidation Companies

You may be wondering, “Is debt consolidation a good idea?” If so, then you must assess your financial goals and weigh the pros and cons of your selected consolidation method. Debt consolidation companies may be a good option if you need professional help with your debt. These companies aim to help you organize your credit lines and develop a repayment plan. 

You may also choose to hire a debt settlement program, which will work with you and discuss the option of settlement. Agents at the company may negotiate with your creditors and ask them to let you off the hook in exchange for a large, lump-sum payment. While you may negotiate with creditors on your own or develop your own repayment plan, you may need the help of a reliable company if you have had trouble managing your own finances.

A debt settlement or debt consolidation company may be particularly useful if you have a great deal of credit card debt. This is because credit cards have extremely high-interest rates, which makes it difficult to become debt free. If the company you hire settles your credit card debt, then you will not have to pay off the remainder of your interest. If you have no issues making your monthly payments on time, then you may consider a debt consolidation loan or balance transfer credit card instead.

Learn About Debt Consolidation Loans and Their Interest Rates

If you are looking for debt relief, then consolidation loans may be the answer. If you are approved for this type of loan, then your new lender will pay off your existing debts. You must then pay back your lender in the form of one large loan. 

A loan may help you if you have multiple lines of credit, want to condense your credit lines and want one interest rate. In fact, the interest rate for a consolidation loan may be much lower than your current interest rates, especially if you have a good credit score.

Remember that debt consolidation loan rates are different from company to company, and you may not receive approval for a low rate if you have poor credit. Generally, interest rates for consolidation loans fall between five percent and 36 percent. Customers with the best credit scores will qualify for the lowest interest rates. 

In addition, interest rates may be fixed or variable. A fixed interest rate means that it remains at same rate for the entirety of the loan. A variable rate starts low and increases over time. A fixed-interest rate may be the best solution if you cannot pay back your loan in a short amount of time. A variable interest rate may be the better solution if you can quickly pay back your loan. 

If you are looking for debt consolidation for bad credit, then you may want to wait until your credit score improves. Otherwise, you may be stuck with an extremely high-interest rate, which will not save you money. In fact, it may cost you more money if your current lines of credit have lower interest rates.

Learn About Balance Transfer Credit Cards

Another debt consolidation plan is the balance transfer credit card, which is similar to a consolidation loan. If you qualify for a balance transfer, then your new credit company will consolidate all your credit card debt into one line of credit. 

As with consolidation loans, balance transfer cards only make sense if you have a good credit score and receive a low-interest rate. Some companies may even offer you a zero percent interest rate for the first few months. If you pay back most or all of your debt in this period, then you will save a great deal of money in interest.

If you want to apply for a balance transfer credit card, then first try to improve your credit score. A credit score that reaches 700 or more may help you receive an initial zero percent interest rate.