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How to Find the Best Debt Consolidation Loans

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Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”

A new credit card here, a personal loan there, maybe a line of credit — it’s easy to find yourself carrying a variety of balances over the years. These are often unsecured debts with high interest rates and different repayment terms.

Debt consolidation loans are one option to consider if you need help simplifying your debt. While they aren’t for everyone, these loans can allow you to lower interest rates, make it easier to pay off balances, and in some cases, reduce your monthly payment.

Keep reading for how to find the best debt consolidation loan for your financial situation.

What’s a debt consolidation loan?

A debt consolidation loan is an unsecured personal loan that allows you to consolidate various debts, including credit card balances and loans or lines of credit, into one simple balance. If you have four credit cards that you’re paying off, for example, you can use a debt consolidation loan to pay off your credit card balances and then start making payments on the loan.

Alternatively, some lenders may pay off your creditors directly, so you’ll be asked to provide them with loan balances and account numbers.

As is the case with nearly all credit-based products, the lowest interest rates on debt consolidation loans are generally available to those with the best credit scores. In general, you can expect to see APRs starting as low as 5.99% and going as high as 35.99%.

With Credible, you can easily compare rates from various lenders at once.

How do debt consolidation loans work?

To take out a debt consolidation loan, you’ll need to submit an application and meet the lender’s borrowing requirements. Once you’ve applied and qualified, you’ll be offered your terms, including a loan amount and a fixed interest rate. Your lender will provide a schedule for your loan, including a monthly payment amount based on your chosen loan term.

In some cases, this new payment may be less than the combined amount you were paying on your existing debts. While a lower payment may help with cash flow, note that this may cost you more in interest over the life of the loan, and it could take you longer to get out of debt. If you agree to the loan terms, you’ll then sign closing documents for the funds and they’ll be disbursed.

Depending on the lender, there may also be loan closing costs and other fees to consider, such as an origination fee or early payoff penalty. These can affect the total cost of your loan, so do the math to ensure that even with these fees (when applicable), you’ll still save money in the end.

Where can I find a debt consolidation loan?

Debt consolidation loans are offered by a variety of different lenders, from banks and credit unions to credit card issuers. Choosing the right one for you depends on your needs and your credit history.

You may want to consider a debt consolidation loan through your existing bank or credit union. Since you have a relationship established there, it might be easier for you to get approved and funded, and managing your loan may also be simpler. Just make sure that the interest rates, fees, and terms are in line with what you are seeing elsewhere, so you don’t pay more for the sake of convenience.

You could also opt for a debt consolidation loan through a credit card issuer. Credible Partner Lenders like Avant, Best Egg, and Discover provide debt consolidation loans of up to $35,000 with a simple online application. Rates are as low as 5.99%, depending on the lender you choose and your FICO score. People with excellent credit will generally be offered much lower rates than those with bad credit.

Interested in consolidating your debt? Credible makes it easier and faster to shop around for the best debt consolidation loans.

How can I get a debt consolidation loan?

Getting a debt consolidation loan is a fairly straightforward process, if you meet the lender’s requirements.

  1. Comparison shop. First, you’ll want to comparison-shop to find the best rates and loan terms. Credible is a great place to start, since it lets you see multiple lenders and get details about their loan products in one place.
  2. Prequalify. You can often prequalify with many lenders, especially if you go through a platform like Credible. Prequalifying allows you to compare rates and get an idea of your likelihood of approval, with just a soft credit check and no commitment.
  3. Apply. Once you’ve picked a lender and prequalified, it’s time to apply. You’ll need to provide personal information, such as your Social Security number, address, date of birth, email, and income. The lender will usually conduct a hard credit check at this time, and you’ll be given a final decision.
  4. Close. Now, it’s time to close on your new loan. Your lender will send over closing documents that outline your loan amount, interest rate, repayment terms, and any applicable fees. Once your loan documents are signed, your funds will be disbursed (either to you or directly to your creditors). Funding times will vary, but you may be able to receive your loan funds in as little as one business day or, in some cases, the same day.

How much can I save with a debt consolidation loan?

Debt consolidation loans can be a great way to save money on your debt repayment, usually by lowering your overall interest rates. How much you’ll save depends on your unique situation.

For example, say you have $10,000 in credit card debt at a current APR of 25%. If you only make the minimum payment of $309 each month, it will take you about four-and-a-half years to pay off the balance, and will cost you a total of $16,808 ($6,808 of which is just interest).

With a debt consolidation loan, you could lower that APR to 5.9% and lower your monthly payments to just $193. While it might take you a few extra months to pay off the debt, you’ll pay just $1,572 in interest: a savings of $5,236!

  Credit cards Debt consolidation loans
Loan amount $10,000 $10,000
Interest rate 25% APR 5.9% APR
Minimum monthly payment $309 $193
Repayment term 55 months 60 months
Total interest paid $6,808 $1,572

What factors should I consider in a debt consolidation loan?

Each debt consolidation loan is different, so you’ll want to consider and compare each of the factors involved to ensure that you’re picking the right loan for you.

  • Interest rate and APR: The interest rate and APR, or annual percentage rate, on your loan will dictate how much that loan costs you in the end. The lower the rate, the less you’ll pay. When consolidating debt, choose a loan that reduces your effective interest rate.
  • Closing costs and fees: Some lenders may charge origination fees, administration fees, and other closing costs, which will add to your total loan expense. You may need to factor these costs into your total borrowed amount to make sure your final disbursed funds are enough to cover your debts.
  • Loan term: Your loan term will determine how long you have to repay the debt and what your monthly payment amount will be. Balance your debt repayment goals with your monthly budget to find the right term for you.

Debt consolidation loan alternatives

Here are a couple of alternatives to debt consolidation loans to consider if you want to pay off your existing debt faster, or for less interest.

0% intro APR balance transfer credit card

The first option is to utilize a 0% balance transfer card. With a balance transfer credit card, you can shift your debt from one account to another, taking advantage of an introductory zero-interest opportunity. Just be sure to pay off the balance before the introductory period ends, or your remaining debt will begin accruing interest at the card’s regular rate.

Home equity

Another option is to tap into your existing home equity through a home equity loan. This can be a good option if you have good credit, and even if you have fair credit. A home equity loan allows you to utilize the equity that’s already in your property. Just be aware of the potential pitfalls when using a home equity loan to pay off debt. This method turns your unsecured debt — such as credit card balances and medical bills — into a debt that’s secured by your home. If you were to default on the loan, you could lose your property.

Debt consolidation loans can be a key part of any debt management plan. If you’re juggling multiple debt balances, especially with higher interest rates, these unsecured personal loans may be worth considering.

Check out Credible to compare debt consolidation loan rates and find the one that’s best for you.

About the author

Stephanie Colestock

Stephanie Colestock is a Washington, D.C.-based writer who has more than 10 years of experience in writing about investing, business, and personal finances. She’s contributed to outlets such as Yahoo! Finance, MSN, Investopedia, Credit Karma, Credible, and more. She holds a bachelor’s degree from Baylor University and is in the process of earning her CFP® certification.

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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