If you’ve run up high balances on credit cards, for instance, a loan for consolidating debt can lower your interest costs now and help you get out of debt faster. If you owe $7,500 across credit cards with an average APR of 25%, for example, interest charges alone will be $156 per month. Consolidate these debts into a lower-interest personal loan with a 13% APR, however, and you’d immediately cut interest costs nearly in half to just $81 per month.
In April 2018, the average FICO® Score in the U.S. was 704, which is a good score.1 Comparatively the average VantageScore 3.0 score in 2017 was 675.2 And even though average credit scores are in the good or almost good range, they vary by age, state and other factors. So, there are still plenty of us with lower than desired scores and plenty of room for fixing credit issues. While fixing credit doesn’t happen overnight, there are steps we can take right now to get the process started.
If you have a poor credit rating, it can be difficult to get a debt consolidation loan. If your credit rating is too low, you may have to first take proactive steps to improve it, and then apply for a debt consolidation loan afterward. In addition, people with less-than-stellar credit can sometimes get a secured debt consolidation loan using a major asset as collateral. For example, people often use their homes as collateral to consolidate their debts with a home equity line of credit. However, if your credit is particularly bad, even a secured debt consolidation loan may be difficult to obtain. In that case, you'll likely have to consider other options to address your outstanding debts.
If you don’t address the exact cause of your bad credit, the damage is likely to worsen the longer it goes untreated. For example, if you’ve missed a few credit-card payments, repaying at least the minimum amount needed to change your account’s status from “delinquent” to “paid” on your credit reports will prevent your score from falling further. The same is true of collections accounts, tax liens and other derogatory marks — at least to a certain extent.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage and history. The APR ranges from 6.95% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. *The origination fee ranges from 1% to 6%; the average origination fee is 5.2% (as of 12/5/18 YTD). There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
A debt management plan, or DMP, is offered by credit card debt consolidation companies. Often referred to as non-profit credit counseling. What happens in a DMP is your cards will all be closed. The company you choose to work with will negotiate your interest rate down and set up a repayment plan. They do this with all of your accounts. You will pay one fixed monthly payment to the consolidation company that is then dispersed to your creditors, minus their fees.
While there are no specific credit requirements to get a loan through Marcus, the company does try to target those that have “prime” credit, which is usually those with a FICO score higher than 660. Even with a less than excellent credit score, you may be able to qualify for a personal loan from Marcus, though, those that have recent, negative marks on their credit report, such as missed payments, will likely be rejected.
A lender’s maximum debt-to-income ratio is the amount of your monthly debt payments divided by your gross monthly income. Lenders use this figure to determine your ability to make loan payments each month. Some debt consolidation lenders allow a debt-to-income ratio as high as 50 percent, meaning your monthly debt obligations should add up to 50 percent or less of your gross monthly income. Others recommend little revolving credit.
If you are considering using the equity in your home, you should do the proper due diligence to determine if it is economically feasible and wise to roll credit card debt into your home mortgage. A few calculations to compare the interest you will pay utilizing different consolidation methods will give you a clear picture of the right scenario for you.
If you get denied for a major credit card, try applying for a retail store credit card. They have a reputation for approving applicants with bad or limited credit history. Still no luck? Consider getting a secured credit card which requires you to make a security deposit to get a credit limit. In some ways, a secured credit card is more useful than a retail credit card because it can be used in more places.
Longer credit histories typically, though not always, can mean improved scores. What it does show to prospective creditors is that you are able to manage lines of credit in a responsible manner for a significant amount of time. Note that when creditors receive your credit report, it does not just show length of account, but average balance, as well as how often payments are late or missed. The graph below looks at the age of your credit history versus the average score for that amount of time.
Debt.com has put together a comprehensive Credit Repair Process Guide so you can understand what it is, how it works and the three different options you have for repair. We tell you everything you need to know to decide on the best way to repair your credit. If you still have questions, head over to our Ask the Expert section to get the answers you need from our panel of experts.
Making your credit payments on time is one of the biggest contributing factors to your credit scores. Some banks offer payment reminders through their online banking portals that can send you an email or text message reminding you when a payment is due. You could also consider enrolling in automatic payments through your credit card and loan providers to have payments automatically debited from your bank account, but this only makes the minimum payment on your credit cards and does not help instill a sense of money management.
The best things in life are free. It won’t cost you a dime to speak with one of our experts about your situation. We’re upfront about the results you can expect from our program. If we don’t think you’re a good fit, we’ll tell you. We have an amazing word-of-mouth reputation, and we plan to keep it that way. The last thing we want is a disappointed client. Why not reach out to us today?
After getting a debt consolidation loan, 68 percent of respondents changed their spending habits for the better. More than 30 percent said they now pay bills on time, 22 percent monitor their credit reports and 13 percent stopped using consolidated accounts. However, not all respondents changed their habits for the better, with 10 percent reporting they accrued more debt, which is in line with the 9 percent who said they also accrued more debt when asked if the loan was a good choice. Seven percent maxed out credit lines and 7 percent made charges on consolidated accounts.