Understand All Debt Consolidation Loans: Advantages and Best Options

However, are debit consolidation loans the best option for you? We’ll cover all the advantages of debt consolidation loan.

In addition, thinking about showing you the best way, we will also cover some of the best debt consolidation loan options. That way, at the end of the article you will have a complete notion and will know how to decide if this credit is worth it for you.

What is debt consolidation loan?

If you have several debts, for example, credit card, overdraft, personal loans and are lost in the middle of so many installments and interest, debt consolidation is a good way out.

Basically, you take out a new loan for the full amount of the debts you already have and use that money to pay them off at once. With this, you no longer have several installments and start paying only a single monthly installment, usually with lower interest rates.

How does debt consolidation work?

Debt consolidation is a practical solution for those who want to regain control of their finances. The process is simple, let’s see the step by step:

1. Estimate your debts: Start by listing everything you owe: amounts, terms and, especially, the interest rates of each debt;
2. Choice of lender for consolidation: Banks and finance companies offer this type of loan. They will analyze your profile, ability to pay and score before releasing the credit.
3. Contracting credit: With approval, you close a single contract. It replaces all the others, bringing the debts together in a single monthly installment.
4. Debt settlement: The amount released in the new loan is used to pay all creditors, zeroing out outstanding debts.
5. Payment of the new contract: Now it’s time to focus on paying this new one Here’s a tip: consolidating debts requires discipline. Even with better conditions, delays can generate new fees and further complicate your situation.

Advantages of debt consolidation

If you’re thinking about organizing your financial life, debt consolidation is a great place to start. Check out some of the main advantages:

1. Ease of management: With only one installment and one due date, it is much easier to control your expenses. So you can say goodbye to lists with an expiration date;
2. Lower interest rates: By replacing expensive debt, for example, credit card, with a loan with lower rates, you will save on the total payable.
3. Extended payment term: Consolidation allows you to renegotiate the terms, making the installments small and adjusted to what you can pay;
4. Improves your score: By paying off your old debts, your name begins to recover in the market. Over time, your score will improve and you will have better opportunities;

In short: consolidating debt is more than a temporary solution. It is a strategy to regain control of your financial life. Also, consider using management means to further increase efficiency in the process of exiting accounts. A good first step is to know and apply the best personal finance tips.

When is debt consolidation worth it?

Debt consolidation can be an excellent strategy, but it is not always the best way out, let’s see when it really pays off:

1. High interest rates: If you are tangled up with credit card or overdraft debt, where interest rates are very high, exchanging these debts for a single contract is a good strategy.
2. Difficulty in organizing bills: When there are many installments with different maturities, it ends up getting confused when it comes to paying. Is this your case? So this credit is worth it;
3. Renegotiation capacity: If the new contract offers better conditions, for example, longer terms and installments that fit your budget, it pays to take out a debt consolidation loan.

Best Debt Consolidation Loan Options

1. LightStream

LightStream emerges as one of the best options on the market. With it, it is possible to unite different debts into one, such as car, boat and credit card financing.

At first, LightStream offers interest rates starting at 6.49% per year, and can reach up to 25.29%, depending on your credit analysis. Payment terms are flexible, ranging from two to seven years. In addition, he gets from US$ 5,000.00 to US$ 100,000.00 dollars.

To qualify, you need to have a good to excellent credit history, with a few years of responsible use of different types of credit. It is also important to demonstrate stable income, have assets or some emergency reserve, and not have many records of default.

2. Citi

Among the options available to those looking to consolidate debt, Citi stands out for offering flexibility and some exclusive advantages for the bank’s customers.

First, the interest rates are estimated to be between 11.49% and 20.49% per year, and you can pay the debt in up to 5 years. Above all, he gets from US$ 2,000.00 to US$ 30,000.00.

In addition, for those who are already Citigold or Citi Priority customers, there is a 0.25% discount on the fee. In fact, if you opt for automatic payment, you can still get another 0.50% reduction, making the cost of the loan even more attractive.

3. Avant

If you have a dirty name or a bad credit history, Avant proves to be the best choice. Mainly because it is aimed at those who have a credit score of 550 or more.

It is important to be aware of the rates that vary from 9.95% and 35.99% per year. Although the rates can be high, Avant stands out for offering more affordable terms than other lenders. The payment term is up to 5 years, being able to request up to US$ 35,000.00.

To hire, it is necessary to have an account with Avant, prove income, pass identity verification and have an active bank account. There is a 4.75% administration fee, as well as fees in case of late or declined payment, so keep your accounts up to date.

4. Discover

Discover can be an excellent choice for consolidating your debts. The annual rate varies between 7.99% and 24.99%, and can request up to US$ 40,000.00, to be paid in up to 7 years.

If you wish to apply for this credit, you will need to have a minimum credit score of 660, proving an annual income of at least $25,000.

Conclusion

The debt consolidation loan is an alternative for those who want to reorganize their finances and get out of the suffocation.

However, he must choose the lender well. Options such as LightStream, Citi, Avant and Discover offer decent conditions for different profiles, from those with excellent credit to those with lower scores

In the end, consolidating debts is not just a way to pay bills, it is a strategy to start over with focus, discipline and planning, building a lighter and more sustainable financial life.