How to Choose the Right Debt Consolidation Company

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As a part of our financial planning and strategies, we often take multiple loans to fulfil various needs. However, it is also important to repay them, and it’s here that things can get complicated. 

For instance, when you have multiple debts that need elimination, you must ensure none of them default to prevent further charges and interest hikes. That’s why I find that many people choose to consolidate their loans into a single account where they can pay it off with one interest rate. Not only does this cover all your debts, but it also reduces the overall bills you must pay each month.

So, considering a debt consolidation loan, you must look for companies offering the same. But in a sea of banks, credit unions, and personal lenders, how do you know which company to choose? In my experience, 5 factors weigh the most when choosing the right debt consolidation company.

  • The types of loans

When choosing your lender, you must first clarify what kind of loan you wish to take out. Is it a personal loan? A home equity loan? Depending on your needs, you should pick a company that specialises in the area. 

It is necessary to weigh the pros and cons and examine the history of the company that you approach. For example, if you’re planning to take on a student loan, it’s wise to approach a company or lender who is reputed in the same.

  • Your credit score

Your credit score is one of the most important elements when applying for a consolidated debt. The higher your credit score, the better your chances of getting a rolled-over account. With a consistent and long payment history, your creditworthiness will be impressive and fetch you the debt. 

However, this does not mean that if you have a low credit score, you cannot get a consolidated debt. In fact, some banks specialise in catering to people with such circumstances. Hence, to narrow your search for the right company, it’s essential to know your credit score.

  • Your loan amount

My next suggestion will be before approaching a company for your consolidated debt, fix an amount you need to take out. This is because some companies have a cap on the amount you can borrow. Further, find out the payoff amount that you need for each debt. Once you have them listed, you can comfortably approach companies willing to offer you the amount you need.

  • Interest rates

This is one of the most important factors you need to consider while taking out a consolidated debt. The main advantage of getting a rolled account is paying off all your loans with a single, lower interest rate. Make sure that your lender charges an annual percentage rate that you can afford. Otherwise, in my opinion, the consolidated debt has no real purpose.

  • Maintenance, Processing, And Operational Fees

It’s important to remember that the amount that you borrow is not the only part of your expenses to pay off. You need to pay operational, maintenance, and processing fees. However, these amounts vary from bank to bank and lender to lender. Comparing the schemes can help you get a consolidated debt with minimal fees.

Parting Words

When you’re looking for a company to offer you a rolled account, always conduct your own due diligence. Whether it’s a non-banking financial company, a private lender or a reputed bank, they all offer different fee structures, tenures and interest rates. The more you browse, the better options you get for making your debt elimination easy. So, there we go! Hopefully, this guide will be helpful for you. 

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