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Unsecured Debt Consolidation Loan

unsecured debt consolidation loan
Betsalel Cohen
UpdatedDec 5, 2022

Unsecured Debt Consolidation Loan - Compare Terms

An unsecured debt consolidation loan is a simple financial product based on the following components: Amount of loan, the term (number of months to repay the loan), interest rate, and fees.

The most common fee is an origination fee, which is deducted from the loan when the funds are sent to your account. For example, on a $10,000 loan with a 5% origination fee: You will be charged a $500 origination fee and receive $9,500 upon the successful issuance of your loan.

Lenders are obliged to show you an additional interest rate, APR (Annual Percentage Rate), that takes into consideration the interest rate, fees, and length of the loan. Check out the image to see some examples of different offers for $5,000 and their respective APR.

unsecured debt consolidation loan APR based on loan fees

Unsecured Debt Consolidation Loan Alternatives

Is an unsecured loan the right choice for you? While a personal loan lets you make one payment over a short period, it isn't the right debt solution for everyone. Check out other ways to consolidate your debt.

Do you want a low monthly payment? If you have equity in your home, then a home equity loan or cash-out mortgage offer you low-interest rates and a long-term payment schedule. You don't need excellent credit to qualify. If you are struggling with your monthly payment, your credit is damaged (or about to tank), and in financial hardship, then consider a debt settlement program. If you qualify, then you might be debt-free within 2-5 years.

Alternatives to a Personal Loan

People also ask

Frequently Asked Questions

Is it a good idea to get an unsecured debt consolidation loan?

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There are a lot of good reasons to take out a debt consolidation loan. Most importantly, the loan should improve your financial situation. Here are a few of the primary reasons:

  • Lower your monthly payment

  • Save money by lowering your interest rate.

  • Pay-off your loans quickly.

  • Easier payment schedule with just one monthly payment.

  • Lower your credit utilization rates on your credit card.

What is a Good Interest Rate for an unsecured debt consolidation loan?

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Your credit score is a crucial factor in determining whether you qualify for a loan, as well as the interest rate on loan. While an excellent credit score will get you the best rates, there are unsecured debt consolidation loans for people with bad credit. Interest rates vary.

In general, the shorter the loan repayment period, the lower the interest rate. If you can afford larger monthly payments, then you can choose a shorter-term loan. Interest rates also vary by lenders. Shop around and compare your options.

Who offers unsecured debt consolidation loan?

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Are you looking for the best personal loan company?

Personal loans are offered by banks, credit unions, and online lenders. Each lender has its own model for approving loans and pricing their loan.

Not all lenders are the same. Some specialize in excellent credit loans and others in bad credit loans. We have provided you with tables to compare the companies based on credit score, loan amount, and loan rates. In general, lenders offer personal loans for many purposes including debt consolidation, medical bills, weddings, vacations, big-ticket items, and home repairs. However, when comparing companies, check to see if they offer discounts for certain types of loans, especially debt consolidation loans.

Can I get an unsecured debt consolidation loan with bad credit?

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The short answer: Yes, it is possible to get a bad credit debt consolidation loan. However, you need to ask yourself if that is the best solution.

If you have bad credit, then expect to pay higher interest rates than borrowers with excellent credit. An unsecured loan allows you to pay off high-interest rate credit cards, create an affordable monthly fixed payment, and set you on the road to debt freedom.

However, if you run up debt again, then you didn't improve your situation. It is common for people overwhelmed with debt to think that if they could borrow enough to pay everything off they would have a fresh start and be able to take control of their finances.

If you do not qualify for a bad credit personal loan, then look for other debt solutions.

Dealing with debt

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q2 2022 was $16.15 trillion. Housing debt totaled $11.71 trillion and non-housing debt was $4.45 trillion.

According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1.739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

Collection and delinquency rates vary by state. For example, in Connecticut, 17% have student loan debt. Of those holding student loan debt, 6% are in default. Auto/retail loan delinquency rate is 2%.

While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.

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