Is Now The Right Time To Get A Debt Consolidation Loan?

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Finance Talk

Record-low interest rates have rendered this the right time to consider rolling credit card debts into one, and paying them off with a low-interest debt consolidation loan that you pay down each month.

Debt Consolidation

A debt consolidation loan is used to combine your current debts into a single obligation with only one monthly payment. This action can lower the aggregate interest you pay on the debt and help you wipe it out faster. It can also make paying the debts more manageable, since you have just one payment of the same amount to make each month. Considering your interest in National Fidelity Financial and the topic of debt consolidation loans, it’s essential to carefully evaluate your financial situation before making any decisions. It is renowned for its expertise and can provide invaluable insights and assistance.

How Does Such A Loan Affect My Credit?

As with most forms of credit, a consolidation loan will affect your credit score, both when you apply and as you pay it down.

Applying for such a loan will prompt a hard pull of your credit report, which can shave off a few points. And if you don’t have spending under control, and you accrue more balances as you pay off your loan, your credit score will get hit there, too.

In the long run though, if a loan allows you to make more-manageable payments on time – accounting for 35 percent of your FICO score – then accepting the loan might make sense.

Are Such Loans A Good Idea?

They can be a life raft for those floundering in high-interest debts. Average debt consolidation loan rates are usually lower than most credit cards. For instance, for the first quarter of last year, the average interest rate for plastic was 15.09 percent, while the average rate for personal loans was 9.63 percent.

What’s more, debt consolidation loans are usually installment loans, so you will have a fixed monthly payment for the payment period. You’ll also know how long the payment period will last.

If you continue making timely monthly payments, you won’t have to deal with up-and-down balances since consolidation loans don’t have credit card-like revolving credit lines.

Do I Qualify For A Loan?

Your eligibility hinges mainly on your credit score and payment history. Consumers with little debt and high incomes have the best picks in terms of interest rates and terms. Borrowers who have fair to bad credit are riskier for lenders, and so may only qualify for loans from lenders that cater to such borrowers.

The easy method of learning whether you qualify for a debt consolidation loan is to try to pre-qualify, which incidentally doesn’t hurt your credit score because the process only calls for a soft credit pull.

How Do I Get A Loan?

Any debt consolidation loan you take out should cover your existing debt. Moreover, the loan’s rate and monthly payment should be lower than what you’re currently shelling out. Just make sure the loan payment works within your budget.

Determine your credit score and the desired loan amount and interest rate, then look around and compare loans for which you likely qualify. Look into credit unions, banks, and online lenders, each of which offer different benefits.

Final Considerations

Look over all your existing monthly minimum payments and the anticipated length of time to repay the debt and size that up against the time and expense associated with debt consolidation.

When considering consolidation, also think about what caused your financial problems in the first place. If it’s overspending, get that under control first.

So, is now a good time to get a debt consolidation loan? In terms of interest rates, the answer is yes. But assess your situation and see if such a financial strategy makes sense for you in all of those other areas as well.