When To Consider Debt Consolidation

If you’re making separate payments on high-interest credit cards, auto loans and personal loans and feeling underwater, debt consolidation might help get your feet back on solid ground.

Debt consolidation can make it easier to pay off high-interest loans faster, saving you money in the long run. Instead of paying each of your credit cards separately, during the debt consolidation process, a bank will take over your existing debts and offer you a personal loan with a fixed rate and term of payment. Each month, you make payments to the new financial institution instead of the original one.

With personal loans at a lower interest rate, you can create breathing room in your monthly budget and save money in the long run on your revolving door of credit card debt.

1.     Decide If Debt Consolidation Is Right For You

Often refinancing is the best option if you have great credit and stable income. Many top providers limit consolidation loans to applications with good to excellent credit, usually in the high 600s or more. If you’re still working to build up your credit history, cosigning with someone with a high credit score can allow you to access these offers.

2.     Evaluate Your Budget

Debt consolidation gives you a fixed monthly payment you have to make each month, which can be a significant financial burden. Wait to consolidate your debts until you have a stable source of income that can predictably cover these monthly charges. If you’re a freelancer, on the job market or thinking about going back to school, you might not be able to always meet a regular payment or get a low enough interest rate to make the process worthwhile.

3.     Shop Around For Better Interest Rates

The only worthwhile debt consolidation options are ones that will save you money in the long run due to lower interest rates. Compare financial providers based on the current Annual Percentage Rates (APRs) of your current credit cards or other forms of debt as a baseline.

It can be difficult to handle the search on your own and to know if you’ve actually found the best possible offer that will go the farthest to knock down your debt. Fiona’s comparison platform streamlines the process of finding relevant personal loans. The filter options help you sort through offers available based on your income and credit score, so you can quickly search for offers that actually work for you.

Compare available offers to look for annual percentage rates (APRs) that will make a measurable dent in your budget — in terms of both the total amount you’ll pay as well as on your monthly payments. For example, if you could save $50 on your monthly payments, that might be enough to cover a trip to the grocery store or your utility bill.

4.     Fill Out A Quick Application

With online financial institutions, you don’t have to travel to a physical bank to sit down with a loan officer and discuss your debt. Online applications can simplify the process and help you get the relief you need more quickly.

Providers will ask for your credit score, employment information and the specifics of the loan you’re looking for in order to match and approve you with the best offers. Fiona can connect you to pre-qualified offers in minutes — so you can see which loans you are most likely to be approved for, quickly and all in one place.