Benefits of a debt consolidation loan
- Single payment to one lending partner
- May have lower interest rates than credit cards
- Easier to make on-time payment with one loan
- Same payment each month which includes principal repayment over the stated loan term 2 to 5 years
Debt Consolidation Loans Explained
Debt consolidation loans are typically unsecured consumer loans made to individuals with the goal of consolidating payments and reducing the borrower’s overall interest expense. Debt consolidation loans do not normally require collateral and they are extended by both banks and non-bank lending partners. Debt consolidation loans are normally repaid over a 2 to 5-year period with monthly installments consisting of principal and interest payments. Monthly payments for debt consolidation loans may be more than the minimum credit card payment because they include both interest and a larger amount of principal repayment. Larger principal repayments and a shorter repayment timeline allow consumers to repay debt more quickly. Debt consolidation lending partners consider an individual’s credit score, income and debt ratios, among other factors when determining whether to extend a loan.
Key terms of debt consolidation loans:
- Annual Percentage Rate (APR) starting at 4.99% for well-qualified borrowers
- Pre-approved loan amounts up to $50,000
- Fixed monthly loan payments which depend on amount, term and APR
- Loan may be repaid at anytime without penalty.
- Funds may be used for any purpose and the loans are typically unsecured