How long do you have to pay off a debt consolidation loan?
Your credit is good enough to qualify for a credit card with a 0% interest period or low-interest debt consolidation loan. Your cash flow consistently covers payments toward your debt. If you choose a consolidation loan, you can pay it off within five years.
When you consolidate debt, the repayment timeline starts from day one and may extend as long as seven years. Your overall monthly payment may be lower than you're used to, but interest will accrue for a longer period of time.
What is the tenure for a debt consolidation loan? Borrowers have the freedom to choose their debt consolidation loan tenure. They can pick any tenure from 12-84 months.
Most loans span three to five years, though some lenders offer shorter and longer term options.
Available repayment periods
You can apply for a loan term from 12 to 120 months depending on the loan amount and purpose. Just remember that the maximum repayment period might be lower for certain loan purposes.
Debt consolidation loans can hurt your credit, but it's only temporary. The lender will perform a credit check when you apply for a debt consolidation loan. This will result in a hard inquiry, which could lower your credit score by 10 points. Hard inquiries will only affect your credit score for one year.
If you do it right, debt consolidation might slightly decrease your score temporarily. The drop will come from a hard inquiry that appears on your credit reports every time you apply for credit. But, according to Experian, the decrease is normally less than 5 points and your score should rebound within a few months.
Consolidating debt can be a good idea if you have good credit and can qualify for better terms than what you have now and you can afford the new monthly payments. However, you might think twice about it if your credit needs some work, your debt burden is small or your debt situation is dire.
Unlike a balance transfer, where you move debt from one account to another, when you get a consolidation loan, the cash is deposited directly into your bank account that you can use to pay off all of your credit card debt at once.
You can use debt consolidation loans for most kinds of debt, including credit cards, outstanding medical bills, car repairs, and more. If you need to borrow money for a purpose other than debt consolidation, you can take out a different type of personal loan.
What credit score do I need for a debt consolidation loan?
Every lender sets its own guidelines when it comes to minimum credit score requirements for debt consolidation loans. However, it's likely lenders will require a minimum score between 580 and 680.
Generally, borrowers with scores of 740 or higher will receive the best interest rates, followed by those in the 739 to 670 range. If your credit score is lower than 670, debt consolidation may not be a good option for you.
Both Direct Loans and Direct Consolidation Loans that repay only undergraduate study or graduate study for 20 or 25 years respectively are eligible for relief in this proposal. Borrowers would not need to be on an income-driven repayment plan to qualify.
The key is to make extra payments consistently so you can pay off your loan more quickly. Some lenders allow you to make an extra payment each month specifying that each extra payment goes toward the principal.
You may pay a higher rate
Your debt consolidation loan could come with more interest than you currently pay on your debts. This can happen for several reasons, including your current credit score. If it's on the lower end, lenders see you as a higher risk for default.
For most people, debt consolidation is the better choice. When comparing the two options, here's what to consider: With debt consolidation, you'll pay less in fees. Balance transfer cards typically charge a balance transfer fee of 3% to 5%.
The potential drawbacks of debt consolidation include the temptation to rack up new debt on credit cards that now have a $0 balance and the possibility of hurting your credit score with late payments. Also note that the best personal loans go to consumers with very good or excellent credit, so not everyone can qualify.
While you may qualify for a debt consolidation loan with bad credit, you'll likely pay more in interest rates. By taking a few months to improve your credit, you could boost your odds of approval for debt consolidation loans and other types of credit and with lower interest rates.
Debt consolidation also generally won't hurt your credit in the long run, and it may even help your scores grow. But it's more difficult to say what the immediate impact will be on your scores because it depends on your current credit profile, the types of debt you have and how you consolidate the debt.
Credit Score
Debt consolidation loans for bad credit are hard to come by. Lenders like to see a credit score of at least 670 for a debt consolidation loan, but probably closer to 700 just to be safe.
Is national debt relief worth it?
Is National Debt Relief Legit? National Debt Relief is a legitimate company that has helped hundreds of thousands of people negotiate their debts. The company's debt coaches are certified through the International Association of Professional Debt Arbitrators (IAPDA).
Debt consolidation is ideal when you are able to receive an interest rate that's lower than the rates you're paying for your current debts. Many lenders allow you to check what rate you'd be approved for without hurting your credit score so you can make sure you're okay with the terms before signing on the dotted line.
If you have several major bills that need to be paid monthly, consider this the first sign that debt consolidation could be a good next step for you. Consolidating multiple payments into just one can help you feel more financially organized and less stressed about having to divvy up your paycheck to pay them off.
Debt consolidation loan
Banks, credit unions, and installment loan lenders may offer debt consolidation loans. These loans convert many of your debts into one loan payment, simplifying how many payments you have to make. These offers also might be for lower interest rates than what you're currently paying.
Bottom line. Debt consolidation can be a handy strategy for paying off multiple debts as quickly (and as affordably) as possible. This can be especially true if the personal loan you use to consolidate your debts doesn't charge you a penalty for paying back the balance early.
