Selecting the Best Lender for Your Loan to Consolidate Debt

You can lower your interest rates and pay off debt more quickly by consolidating your debt. However, which lender is best for you? To compare your alternatives, start by using a debt consolidation calculator. Next, seek out lenders who allow you to pre-qualify without performing a rigorous credit pull, which may lower your credit score.

1. Standing

Insider's Liz Knueven covers personal finance. She worked as a freelance journalist covering finance and autos for companies like Credit Karma and LendingTree before joining the team. She graduated from The Savannah College of Art and Design with a bachelor's degree in writing. One sort of personal loan that enables you to combine several debts into a single lump-sum payment at a set monthly interest rate is a debt consolidation loan. Your total interest charges will be reduced, payments will be made easier, and your payout plan will be more transparent. Peer-to-peer lending services, banks, credit unions, and online lenders are among the places you can find lenders offering debt consolidation loans. Make sure you can afford the monthly payment and that the loan amount will cover all of your outstanding debts before applying. Additionally, search for a lender that provides benefits like direct payments to creditors that might assist you in managing your debt. In order to be sure you're receiving a fair offer, compare rates last.

2. Charges

Insider's Liz Knueven covers personal finance. She discusses financial matters such as debt consolidation, auto loans, and credit cards. You should be aware of your debt-to-income ratio and credit score before selecting a lender. This will assist you in deciding whether a loan is worthwhile given your current financial circumstances. Additionally, it will make sure you avoid applying to unscrupulous lenders who provide extremely high-interest payday loans or auto title loans. Take into account the loan terms, costs, and eligibility conditions of each lender when comparing them. For instance, certain lenders will only provide financing to those who have excellent credit. Some accept candidates with less favorable credit histories. Additionally, some lenders impose origination costs, which are deducted up front from the entire loan amount. It's critical to comprehend the costs related to your loan because they might quickly mount up. Make sure to account for any hidden fees or prepayment penalties that can raise the cost of your loan. Make sure you have the money to make your monthly payments as well. If not, your credit could be harmed by the merged debt piling up once more.

3. Adaptability

Make sure to compare lenders' loan amount ranges, interest rates, and monthly payment plans. Additionally, make sure to prequalify to discover what loans you might be eligible for, if at all possible, without affecting your credit score. A debt consolidation loan lowers the amount of payments you have to make by combining several outstanding debts into a single account and debt payment. But it doesn't alter your spending patterns or stop you from getting into more debt down the road, so before you take out a debt consolidation loan, think about other options for bettering your financial situation. One lender that provides flexible payback options and reasonable loan rates for applicants with bad credit is the Navy Federal Credit Union (NFCU). They also provide free direct payments to creditors and rate breaks for active-duty service members. In order to share the legal obligation of repaying your debt with a co-borrower, NFCU also accepts joint applications.

4. Client Support

When thinking about a debt consolidation loan, it's critical to select a lender with a strong customer service record. Seek out lenders who offer online applications with prequalification choices so you can compare rates without compromising your credit, as well as those that include a soft credit inquiry (which doesn't lower your score). To locate the best fit for your needs, look for a lender who offers a variety of loan levels and repayment options. Even better, some lenders provide user-friendly tools like direct payment to creditors, which can help you pay off debt more quickly by saving you time and effort. Seek out a lender who does not impose prepayment penalties as well. These additional costs, which can mount up over the course of your loan, are assessed when you pay off your debt early. Thankfully, a lot of lenders don't impose these costs on personal loans. But before you apply, make sure to read the fine print. Consider getting a cosigner or working with a credit counselor to negotiate reduced interest rates on your behalf if you do come across a lender that levies these costs.