If you’re facing bankruptcy, credit card debt is unsecured and typically discharged more easily than a home equity loan. Unsecured debt consolidation loans don’t require collateral, and they usually have easier approval requirements than secured debt consolidation loans.
Unsecured debt consolidation loans can have income requirements as low as ,000 annually, debt-to-income ratios of up to 50 percent and minimum FICO credit scores as low as 600.
Once you know how much you can realistically allocate to paying down your debt each month, you can use the amount to determine terms for your loan.
The amount you pay on your debt consolidation loan each month will vary depending on the amount you borrow and how many years you will take to repay it.
Most lenders offer rate quotes, which are soft inquiries on your credit and have no effect on your credit score.
When you do a hard inquiry during the final approval process, it will be reflected on your credit report. Although debt consolidation loans are a legitimate solution for eliminating debt, some other debt consolidation options are scams.
While unsecured debt consolidation loans can be easier to obtain and more convenient than secured debt consolidation loans, they generally have higher interest rates, so they are more expensive to pay down than a secured debt consolidation loan.
Getting a debt consolidation loan is a major financial decision and one that shouldn’t be taken lightly.
This makes applying for a loan convenient, and some providers offer instant approval online, so you can find out right away if a loan is going to work for you.
Home equity debt consolidation loans, a type of secured debt consolidation loan, offer a fixed interest rate.
Interest paid on a home equity loan is usually tax deductible, while credit card interest is not.
Before you apply for a debt consolidation loan, you should consider alternatives, figure out how you’ll make payments and make sure you’re finding the best rate available.
Credit cards with zero percent APR on balance transfer offers allow you to transfer existing credit card balances to that new card. It’s essential to have a plan for how you can make the new payments, especially if you’ve previously struggled to keep up with minimum payments on your balances.
“No lender should charge you upfront before you get the loan … A debt consolidation loan can wipe the slate clean and allow you to start fresh with zero balances on credit cards and other credit commitments.