Neon Funding has joined Cobalt Advisors and Saxton Associates in flooding the market with debt consolidation and personal loan offers in the mail. The problem is that the terms and conditions are at the very least confusing, and possibly even suspect. The interest rates are so low that you would have to have near-perfect credit to be approved for one of their offers. Best 2020 Reviews, the personal finance review site, has been following Neon Funding, Cobalt Advisors, Saxton Associates, Hornet Partners, Piper Funding, Carina Advisors, Corey Advisors, Pennon Partners, Jayhawk Advisors, Clay Advisors, Colony Associates, and Pine Advisors, etc.).
A debt consolidation loan can help you to pay off your debt faster if done right. A major benefit of a debt consolidation loan is that you might qualify for an interest rate that is much lower compared to what you are paying right now. However, you must meet certain requirements in order to qualify for the loan.
Credit Score for Debt Consolidation Loan
If your credit score in less than 600, then you might face difficulties while applying for a debt consolidation loan. With scores under 600, it can be hard to get your loan. It may be one of the best way to get out of credit card debt, but you may need to consider other options.
But with fair and good credit scores, you might be able to get a debt consolidation with lower interest rate than the credit cards or other high interest debt that you are trying to settle. With a lower interest rate, you may need to make lower payments each month, thereby getting out of debt quicker.
With a debt consolidation loan, you can save a lot of money on interest provided that you get a low interest rate. You can consolidate your debt in other ways as well like debt management plans, balance transfer cards and personal loans.
Qualifying for a low interest debt consolidation loan might be harder if you have a lower credit score. If you have a fair or poor credit score, you might qualify for a loan that has higher interest since lenders demand a higher interest rate as compensation for the higher risk they face from low credit score customers. A high interest rate, however, will defeat the purpose of the loan and will not be worthwhile for you.
In case you do not qualify for a low interest debt consolidation loan on account of your interest rate, you might think about getting a secured loan as these charge less interest than unsecured loans. The reason for attractive interest rates is the lower risk that secured loans entail. Secured loans are extended with your car, house or other valuable possession as the security. And this is unfortunately where the catch lies. While you do get lower interest rates with secured loans, you run the risk of losing your home.
Therefore, you should be completely certain that you are capable of paying back the loan on time. You should sit down and make a realistic assessment of your ability for timely repayment. Agree to the secured loan only if you are certain of this most crucial aspect.
To apply for a secured loan, you can use your home equity as collateral. For this, you should have a home and enough equity that will cover the amount that you are borrowing. A home equity loan can be a viable debt consolidation loan since it offers lower interest due to the collateral that you are providing in the form of home equity.
You can get different forms of credit through your home equity, the most obvious being a home equity loan. You can also be entitled to a home equity line of credit or a HELOC. This type of credit is very flexible since you can borrow up to a defined limit like you can with a credit card. All these options can lower your monthly payments but they will not help erase your debt.
Improving Credit Score
In case you do not qualify for a low interest unsecured debt consolidation and are unable to unwilling to take out a secured loan, then you might have to work to improve your credit score. While it might take a few months to improve your credit rating, it is worthwhile since you can save on interest and get better terms with an improved credit score. You must make sure that you pay on time since timely payments have a great impact on your credit score. You should also reduce your credit utilization ratio to boost your credit score since bringing these ratios down can help your score a lot.
Credit Union for Debt Consolidation Loan
If you are a member of a credit union, then you should get in touch to find out whether or not you qualify. The credit union may look at other important aspects besides your credit score like your past relationship with the union, personal scenario and financial history before making a decision.