Looking for a debt consolidation loan? If so, it can be difficult to know which lender to trust. On top of that, time is of the essence when you’re trying to reduce your debt. Perhaps you want to reduce your debt to finance a larger purchase, such as a home loan or car loan. Maybe you just want to eliminate all of your debt and simply have one lump sum payment every month. That said, I’m sure you don’t want to waste time with lenders and options that don’t work. That’s why we’ve put together a list of the best debt consolidation loan companies; to make your research (and life) easier.
Before we get into the reviews and comparisons, it may help you to understand what a debt consolidation loan is, and, if it can truly help your financial situation. The truth is, a debt consolidation loan is not always the answer to your problems. This article, along with the reviews and comparisons, will help you make that call.
What is a Debt Consolidation Loan
A debt consolidation loan is a form of debt financing that lets you pay off your debts and roll your new debt into a single payment every month. This is primarily for unsecured debt, such as credit cards, medical bills, personal loans and other types of unsecured debt.
How Debt Consolidation Loans Work
There are several ways you can consolidate your debt. Here are a few options you can do:
- Home Equity Line of Credit
If you have a mortgage with equity, you can use this to pay off your debts. However, not everyone is a homeowner that may have equity in their home. So if you are a renter, this option doesn’t apply to you. If you are a homeowner, you should research this as an option. The good news is HELOC’s (Home Equity Line of Credit) typically have lower interest rates compared to a home equity loan.
- Zero or Low Interest Credit Card
If you have an existing unsecured credit card with a low balance, that has zero or low interest payments, you can pay off your debt using this strategy. If not, you can compare credit cards that have 12 months interest-free financing and pay off your debts this way. Then, you’ll simply have one monthly payment to make. It should go without saying that you’ll want to pay the card balance off before the 12 months expires. Otherwise, this strategy could put you in a severe financial situation. Most credit cards have interest rates that average 27% APR.
- Credit Union Loan
Not many people know this, but local credit unions are desperate for your business. They even work with consumers that have bad credit. You can qualify for special types of financing, and, get better interest rates in most cases. The key is to pay the loan off as quickly as possible. And if your budget allows it, make double payments every month.
- Debt Consolidation Companies
Most debt consolidation companies aren’t worth your time. They are either shady or charge you an arm and a leg. However, there are a few companies that live up to their reputation. You can see our reviews and comparisons below for further clarification. In the end, it’s actually best if you seek out the help of a credit counselor, as they can help you with creating a debt management plan, as well as provide assistance on a proper debt consolidation loan.
- Debt Management Plan
A debt management plan is a hybrid of a debt consolidation company and credit counseling services. Credit counselors work with you to find the bottlenecks in your finances and offer plans to help you overcome them. In addition, they contact creditors to reduce interest rates and provide funds to pay debt off, leaving you with one lump sum payment every month. However, this plan could take anywhere from 2-5 years to eliminate your debt. And most consumers simply aren’t that patient. In our opinion, this is the best strategy if you are patient enough to weather the storm.