A personal debt consolidation loan is easy to find. You just need to shop around for lenders who offer the best deal and then apply for it.
If you want a loan to consolidate your credit card debt and you think that selecting the right loan is just finding the lowest interest rates, think again. Comparing the APR of each lender is a good place to start. But because lenders quote interest rates in different ways, you need to familiarize with these before you start applying for the loan.
Also, before looking for cheaper rates, check to see if you qualify for a personal loan from your bank or credit union. These loans can be secured or unsecured. However, you’re going to be difficult to qualify for unsecured loans if you have bad credit.
What Is Personal Debt Consolidation Loan?
Personal debt consolidation loan is a personal loan that you can use to consolidate your debts. These loans are available for a range of loan amounts and repayment terms. For debt consolidation, you may choose a range of repayment periods based on the taken loan amount.
The larger the amount of the loans means the longer the terms. Some lenders allow you to borrow up to $25,000 and repay the loan up to 5 years. But this will vary between loan types, secured or unsecured loans, and lenders.
The loan is subject to an interest charge based on the Annual Percentage Rate (APR). The APRs are your primary mean of comparing different loan products and determining the best deal.
Fixed and Variable Interest Rate
Lenders may quote a fixed interest rate or a variable interest rate. If you borrow with a fixed interest rate, the interest charge will stay the same throughout the term of the loan, regardless of any changes in the lender base rate. The benefit of fixed rates is that you can budget with certainty because your monthly repayments are fixed.
Borrowing with a variable interest rate means your interest charge will follow any changes to your lender base rate. This means your monthly repayments could change during the term.
So, fixed rate or variable rate? It depends on the timing of your loan application. If the APR is among the lowest in lending history you can expect that a fixed rate are going to save you money in the long run. But in a stable macro economics condition, a variable interest rate might offer a lower total cost of borrowing.
The Cheapest Personal Debt Consolidation Loan
Debt consolidation personal loans are repayable on a monthly basis. In certain products, lenders may allow you to shorten the loan term by making over-payments and lump-sum payments. Within your credit limit, some consolidation lenders also allow you to withdraw funds from your account on a rolling basis.
Some personal loan products also offer deferred repayment or payment breaks, either at the start of the loan or at an agreed point during the term. But this benefit may result in increased monthly payments to make sure that your debt can be repaid at the agreed term.
The lowest APR is one factor that contributes to a cheap debt consolidation loan. But the total cost of the loan also depends on any other costs for securing the loan.
For example, is there any early settlement charge if you repay the loan in full before the agreed end date? If so, what are the total costs of the loan? Compare all debt consolidation quotes to discover the cheapest personal debt consolidation loan.