If you’re in massive credit card debt, you may have considered taking out a debt consolidation loan. But do you know where to start? A good first step might be to go to your bank and talk with a representative. However, you do have other options. These include credit unions, online banks, and online lenders.
Which Banks Offer Debt Consolidation Loans?
Debt consolidation loans are offered by banks and peer-to-peer marketplace lenders, or P2P lenders. Traditional banks are usually more well-established but have higher qualification requirements. They also have prepayment penalties or a 1-5% origination fee. When looking for a loan, you should seek out lenders offering no prepayment penalties or fees.
P2P lending offers more flexible lending options and has lower requirements for approval. Alternatively, they can have some of the highest (as well as the lowest) APR rates in the industry.
Most lenders offer consolidation loans with a fixed APR, while others offer both fixed and variable rate loans. Loan and refinancing terms will vary depending on the lender, with terms including the minimum and maximum loan amount, minimum and maximum loan period, restrictions, how long it takes to receive funds, and how they are distributed.
Again, origination fees, late fees, and repayment options also vary by lender.
Other Debt Management Options
You may think that taking out another loan is the only way to receive debt relief, but that is far from the truth. A debt management program, or DMP, can go a long way. And at American Consumer Credit Counseling, we provide all that and more, including free credit counseling, low-cost debt management services, and financial education.
A DMP works by consolidating your unsecured debt into one easy monthly payment while reducing interest rates and stopping late fees. Not only will a debt management plan help you cut the amount of time it would cost you to pay your existing debt on your own, but it will also help you change your financial habits for the better. This is because you cannot use your credit cards once you enroll them in the program.
Our certified credit counselors will also work with you to create a budget to fit your needs. Use this budgeting worksheet to calculate whether you have disposable income or a deficit after deducting your expenses and debt from your income.