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The average person living in the USA carries over $5,000 in credit card debt based on the data gathered by CreditCards.com, and furthermore, 38% of households have revolving debts that they refuse to pay off. When in debt yourself, that statistic probably doesn’t surprise you. Although it might seem little, a debt is still a debt and it may hinder you in life if left unattended.

Luckily, there is what we call a debt consolidation, making it possible to come up with a plan that might put you on track in resolving your debts at a lower cost and manageable way.

Imagine putting all your loans together and making into one single loan with a lower interest rate, and better terms. Pretty great, right? That is basically a debt consolidation loan. Now that you are paying less interest per month, you can put more of that money into paying your debt – not only can you pay your loans faster, and in an efficient way, you are also saving money in the process.

It doesn’t matter whether you have a good or bad credit, there is always a debt consolidation loan for you. But what’s the best option for you in your situation is the question, and that’s what we’re going to discuss, and we’ll start with its pros and cons.

Advantages of a Debt Consolidation Loan

  • Cheap – A low-interest loan, that has a long payment term will save you some money every month.

  • More manageable – You don’t have to worry about which loan you’re going to pay first every month as it’s just one single payment.

  • No damage to your credit – In fact, this well help your credit a lot as it makes it easier for you to track and pay down.

Cons of a Debt Consolidation Loan

  • Long payment terms – The result of having a lower monthly payment comes at a cost of a longer term loan.

  • Big Risks – Depending on which type of loan you choose; you are always at risk. A secured loan puts your assets at risk and an unsecured one would put your credit score at risk.

  • Fighting debt with debt – A debt consolidation loan won’t solve your problems if you don’t fix what’s causing your problems. If you’re considering a debt consolidation loan, then you must have a bad habit of mismanaging your debts.

Types of Consolidation Loans

Secured Loans

Any type of secure loans involves a collateral – a collateral is something of monetary value like a house, or a car that lenders can take in case you default on the loan. Having a collateral will make it easier for you to qualify for a loan, but riskier for your assets if you tend to mismanage your debts.

Unsecured Loans

While an unsecured loan isn’t tied to anything besides the borrowers promises of repaying. That’s why when you default, all you risk is damaging your credit. And because of that, it’s a lot of risk for the lenders and not so much from your side.

And because of lenders taking on more risks, they will require you to have a good or excellent credit with the financial income to back-up what you’ll borrow from them.

Choosing the Right Lender for You

Now that you know how a debt consolidation works, you might be thinking about getting one. Below are some of the best consolidation loan companies.

LendingClub: Best if you have a good credit and need a lot of funds.

Pros

  • Available in all states.

  • Offers up to $40,000.

  • Low rates. As low as 6.95%

  • A+ Bbb accreditation.

Cons

  • Only allows 30 and 60 month terms.

  • Slow in processing your application.

  • Pickier on borrowers.

PersonalLoans.com: Connects you to other lenders in different states.

Pros.

  • Available in 50 states.

  • Offers up to $35,000.

  • Manageable interest rates.

Cons.

  • Website only refers you to lenders

  • Website is not informative.

Avant: Faster Funding.

Pros.

  • Available in 50 states.

  • Offers as low as $2,000 to $35,000.

  • You can get your funds the next business day.

  • A+ BBB Accreditation.

Cons.

  • High APRs

  • There’s a late payment fee of $25

Those are just some of the many lenders out there. If you’re serious about getting a consolidation loan, conduct your research. A lot of lenders, rates, and terms vary depending on the different states you’re in.