Debt Consolidation Loans
Analyze costs to replace current debts and the budget impact of each debt payment. Would replacing the bills you currently juggle with one repayment schedule make your budget easier to manage?
What Is a Debt Consolidation Loan?
With a debt consolidation loan, you borrow enough to clear the balances you choose to include, such as credit cards or existing personal loans. The new lender that is consolidating your debts charges you interest and requires scheduled payments to service the balance. Having fewer bills to track may make your finances less complex, but the replacement loan could still cost more once interest and fees are included.
We explain how to consolidate debts using a personal loan. Debt settlement, in which you negotiate to pay less than the total debt balance, is a different process. SlickCashLoan's personal loan request service only connects potential borrowers with lenders. SlickCashLoan does not offer debt settlement.
Check Whether Consolidation Would Improve Your Situation
List each of your debts, the balance, interest rate, minimum payment, and payment due date. If necessary, contact your creditors for the payoff amount. Consider if you would like a payment that is affordable, fewer payments in total, or a lower total payment.
Lower interest rates can be beneficial, but it may take longer to pay off, and you may end up paying more due to an origination fee. The CFPB has resources on debt consolidation that may help you understand how you can end up paying more for consolidating your debts even with a lower monthly payment. Think of your debt consolidation options and a plan to pay off your debts.
Replacing balances with loans will not solve your problems if your spending already exceeds your income. It may cost you more and leave you with new loans and credit card debt.
Compare the Payoff, Fees, and Repayment Term
| Check | What to Work Out |
|---|---|
| Debts included | Which loans can your loan pay off? Keep any debts the loan does not pay off in your budget. |
| Net proceeds | Do you have the money after you make your adjustments to pay off these loans? |
| APR and fees | Compare the cost of credit and the dollar charges listed. |
| Payment and term | Consider the payment term and the payment schedule. |
| Total remaining cost | Compare the total cost of all payments and fees for each loan. Do not double count a fee. |
For example, if you take out a $5,000 loan that deducts a $250 origination fee from the proceeds, then you actually only get $4,750 to pay off your debts. If your balances total $5,000, you still need to figure out where you will get the remaining $250 to close your balances. This is an example to help illustrate the fees and is not meant to be an actual loan offer.
The Annual Percentage Rate (APR) includes certain fees along with interest, expressed as an annual rate. It is not the same as the total cost of the loan. Before agreeing, check how much leaves your budget on each due date, what you will repay overall, and which charges apply if a payment is late.
Plan the Transition Between Creditors
- Check who makes the payoffs. Some lenders pay your creditors. Some lenders pay you. If the lender pays you, you are responsible for paying your creditors.
- Hold yourself accountable for all payments until your debt is officially paid off. Just because you requested a transfer does not mean you don't have to make your payment.
- Look carefully at the next creditor statements. Final interest charges or account balances may still need to be paid.
- New payment schedule! Save confirmations and change automatic payments only after confirming each account's payoff status.
Consider Alternatives Before Replacing the Debt
Approach current creditors to enquire about a hardship arrangement, rate reduction, or change of due date. A credit counselor may be able to review your budget and help you assess a debt management plan; however, ensure you ask about any costs associated with their services.
There are certain consolidation loans that, if used to pay off existing debts, could cause you to lose a favorable rate or important benefits. With a secured offer, also check what you are pledging: the lender may be able to take that asset if you fail to repay as agreed.
How a Request Through SlickCashLoan Works
Submit your information and the loan amount you need. SlickCashLoan may pass your information and request to a potentially interested lender. The decision, as well as lending terms, will be made by the interested lender. A credit lending request does not guarantee you a match, approval, a savings amount, or a requested date for the funds.
Before submitting a request, review the credit-check authorization. Review the lender's written disclosures before accepting an offer. Accept a loan offer only if your repayment will not cause financial strain. After your loan is funded, record and maintain your loan funds distribution.
Frequently Asked Questions
Will a consolidation loan improve my credit score?
There isn't a definite answer to this, but it is possible that a credit score will increase with a consolidation loan. Paying down credit card balances may help your score, while a hard inquiry or new account can lower it. Your payment history and any new debt also matter.
Do I have to close my credit cards?
Paying off a balance does not automatically close the account. Check with the new lender to see if they require closure of accounts. Also think about the fees. Ultimately, the reason you want to close the account is to avoid the temptation to borrow more.
Can consolidation help if I have bad credit?
What you can qualify for and what is offered matters. A bad consolidation loan with high interest can easily create a worse situation. Look at the help creditors are offering and consider credit consolidation counseling along with any offers for a loan.