Choose the Right Lender for Your Consolidation Loan
- 3 min read
Shop Around to Find the Best Consolidation Loan
what type of consolidation loan are you looking for?
there are two basic types of consolidation loans, one that uses your home as security and an unsecured personal loan. the type of loan that is best for you depends on your financial situation, including your assets, income, debts, credit score and credit history.
find a cash-out refinance consolidation loan
if you have equity in your home and good credit, a cash-out refinance is a smart way to consolidate high interest debts, especially at today's low interest rates.
there are many places you can find a cash-out refinance, including the lenders that are part of the bills.com lending network, national banks, local and regional banks, credit unions, or mortgage brokers. the loan refinance market is highly competitive, so it pays to shop and receive quotes from more than one lender.
home equity loans
a home equity loan (hel) or a home equity line of credit (heloc) are other options for using your home equity that don't require refinancing your current mortgage. hels or helocs are a smart choice, if you have equity in your home, but you don't want to refinance your current mortgage.
where to find hel and heloc loans? before the mortgage meltdown, it was easy to find hel and heloc loans, as many lenders were offering them. today, many lenders have stopped offering second mortages. your best source for a hel or heloc are banks or credit unions.
Student Loan Consolidation
Federal Student Loan debt should be consolidated through the US Dept. of Education consolidation program.. Private student loans can be consolidated through an unsecured personal loan or a cash-out refinance or HELOC.
Unsecured Personal Consolidation Loan
Unsecured loans typically carry a higher interest rate than mortgage refinances, HELs, or HELOCs. In order to get a good rate on an unsecured consolidation loan, you need strong credit. Even with strong credit, the best rates on unsecured loans are almost 7%
You can find an unsecured debt consolidation loan at national banks, local banks, credit unions, and peer-to-peer lenders. If you are shopping for a personal loan and your credit is not excellent, but is improving, check out FreedomPlus.
Be very wary of consolidation loans marketed to people with bad credit, especially if they are an online lender that charges an application fee. That kind of pitch is often a way to scam people desperate for a loan.
Alternatives to Loans
A loan might not be your best option. Some debt problems are best resolved through credit counseling, debt settlement, or bankruptcy. Use the Bills.com Debt Coach to find your best debt resolution option, if a loan is not the best choice.
Bills Action Plan
To find the right consolidation loan, make sure that you:
- Check your credit score. The higher your score, the more options you will have and the better rate you will get.
- Determine your equity position. If you own a home, find out its worth. If you have a lot of equity, consider a cash-out refinance or a HELOC.
- If you don't own a home or have equity in your home, look at unsecured loans. Rates will be higher than on a secured loan, but could still improve your finances if you debts are high interest.
- Shop around for any kind of loan you consider.
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 Q4 2022 was $16.91 trillion. Housing debt totaled $12.26 trillion and non-housing debt was $4.65 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 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Each state has its rate of delinquency and share of debts in collections. For example, in Vermont credit card delinquency rate was 2%, and the median credit card debt was $389.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.