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A debt consolidation allows people to take all their existing unsecured debts such as credit cards and personal loans and put them into one single more affordable loan. 

When you have multiple debts open and the charges are starting to mount up, a consolidation loan can be a good idea if the new interest rate that you get is lower than the combined rates of your existing debts. The APRs range from 8% to 36% based on your credit score and other factors.

Whether you are approved for $5,000, $10,000 or $50,000 by a lender or credit union, it gives you the opportunity to get one large amount to pay off all your debts instantly and therefore one lender to repay and stay on top of.

The debt consolidation loan company or program can pay off all your creditors for you directly, or you can receive the sum upfront to pay them off as you choose. However, this money should ideally go towards your outstanding debts and you should not be tempted to use the funds elsewhere or apply for additional credit on top.

Loan Amounts$5,000 to $100,000
Loan Duration2 to 7 years
APR8% to 36%
Bad Credit Accepted?Yes, most have minimum credit score requirement of 560
Same Day ApprovalYes
Secured or UnsecuredBoth

Step 1 – Choose Amount

Decide how much you need to borrow. Calculate all your existing monthly debts and payments and how much you require to clear these and become debt free. 

Step 2 – Apply Online

Check your eligibility using the form provided by Pheabs. We have a loans calculator you can use and you can receive an instant approval. It is important to review the APR that you are offered and to make sure it is cost effective to consolidate your loans.

Step 3 – Receive Funds

Subject to further checks, your loan can be approved and funded in a matter of days — and we are able to accept people with bad credit.

You can use consolidation loans to pay off:

Borrow $10,000 over 5 years (60 months), repay $265 per month, total repayable $15,900, based on 20% APR for fair credit. 

For customers paying $1,000 of debt per month, the savings made would be $735 per month over 5 years.

With credit card debt consolidation, you are able to take all existing credit card debts, across store, retail, personal and gas cards and any outstanding interest that you have can be formed and paid off with one single loan. 

This can be very cost effective if you are in debt and have missed payments on your credit cards and late fees and interest are starting to add up. If you can apply for a debt consolidation loan for credit cards and the APR is low, this could help you save hundreds or thousands of dollars down the line.

This type of product is essentially a personal loan for consolidating debt. Whilst personal loans are typically used to pay for home improvements, tuition, holidays or a new car, this is specifically to target your debts. 

If you are tired of having the credit card and loan companies chasing you for payments and you feel you have too many bills to manage, this can help by putting everything under one roof, so you can pay it off quickly and only have one lender to pay back each month.

Like any other personal loan, you can receive the money upfront such as $20,000 or $50,000 and you will have to repay interest each month, in equal installments for the duration of the loan (over 2 to 7 years). See also installment loans for bad credit.

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What is The Eligibility Criteria?

  1. US or Canadian citizen or resident
  2. Over 21 years of age
  3. Minimum debt amount $5,000 or $10,000
  4. Must have a SSN
  5. Have a live checking account
  6. Able to make payments on time
  7. Bad credit OK — minimum credit score is 560
  8. No recent bankruptcy 
  9. Employed, self-employed, part-time or retired with an income
  • Huge savings — if you have a lot of credit card or loan debt, the opportunity to merge all debts into one can be an impressive saving. Since payday loans and title loans have APRs that range from 200% to 400%, being able to get a new single loan from 8% to 36% can help you save a lot of money.
  • Lower APR — even if you have bad credit, you can still qualify for a lower APR than what you might be paying for other loans and cards
  • Pay off your debt — loans for debt consolidation offer a proven and successful way to pay off all your debts and eventually live debt-free or with very small debts
  • One lender to pay off — rather than having to pay off multiple lenders and credit card providers each month, this gives you one company to focus on and repay each month, with a single monthly payment.
  • Your lender can pay off your debts for you — once you proceed with your debt consolidation loan company, they can pay off all your outstanding debts directly or you can choose to have the money upfront and pay them off and prioritize as you wish.
  • No damage to your credit score — this type of consolidation loan is seen as another type of finance and just having one does not negatively impact your credit score like bankruptcy would.
  • You may not always get a lower APR — based on your credit score and current status, you may not be able to access the lower APR and rates that make debt consolidation worthwhile.
  • If you cannot afford payments in general — you may have racked up debt because of unforeseen circumstances and are struggling to get out of a debt cycle. Having a debt consolidation loan will still require you to make monthly payments on time and it will defeat the purpose if you cannot keep up with them — which can lead to an impact on your credit score.
  • Cannot stop you spending or taking out new loans — to make this product effective, you should commit to just this single loan and make sure you can pay it off. If you have a habit of taking out new cards and loans and wish to start building up debt again, this will not be sensible.

Yes, debt consolidation loans are typically best suited for people with poor credit or extremely bad credit — and they offer a viable way to pay off and clear your debts. Most lenders in the space require you to have a minimum credit score of 560 or 600 if the product is unsecured or you may need to use collateral (car or home) or a cosigner if your credit is very bad. See also loans for credit score 500.

best debt consolidation loans

Is the APR and rate lower — To make debt consolidation truly effective, you need to be able to do the math and check that the new rates you are getting are cheaper than what you are currently paying on your current credit cards, loans and other products.

Will it help you pay off your debts — If you have a number of outstanding unsecured debts, the consolidation loan should be designed to help you clear all of them in one go. 

But if you also have upcoming expenses such as planning to pay for a wedding, buy a new car or need to keep up with heavy mortgage payments, you need to be able to consider if you can keep up with the debt consolidation payments and others on top.

Are you able to manage your personal spending — Are you someone who is used to taking out loans or new credit cards, or your spouse too? Taking a loan for debt consolidation should help you pay off existing debts and it is not necessarily a new clean slate to go and take out more loans and start again. Your main focus should be on clearing the initial single payment and rebuilding from there.

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Is a Debt Consolidation Loan Secured or Unsecured? Do I Need To Use Collateral?

A debt consolidation loan is typically unsecured and is another type of personal loan. This means that you do not require collateral such as your car or home to be used in order to be eligible.

However, in the cases of having very bad credit or you do not meet the minimum credit score criteria which is around 560 or 600 depending on the lender, you may be able to use your home as collateral to get approved and funded. But note that this could be at risk of repossession if you are unable to keep up with your loan repayments.

Is Using Credit Card Consolidation Always Cheaper?

No, whilst you can save a lot of money using a credit card consolidation, it is important to note that the APR, fees and rates charged must be lower overall that what you are paying monthly and what you might pay over the course or 2 to 5 years. It is important to calculate your debts and see how much you would pay for a debt consolidation loan overall to see if it is makes financial sense.

What Are The Risks?

With a debt consolidation loan, you are not guaranteed a lower rate compared to what you are paying for your credit card and loan debts — so it is important to do the calculations to see how much you can save and if it is worthwhile.

In addition, if you are using home as collateral for the loan, this could always be at risk of foreclosure if you are unable to keep up with loan repayments long-term.

Will a Lender Charge Me an Originator Fee?

Yes, a lender may charge a set up or originator fee ranging from 1% to 10% of the loan amount and this fee can be upfront or added to the overall interest. It is important to be aware of this. A lender can also charge balance transfer fees and early closing fees too.

How is Debt Consolidation Different To Debt Relief?

Debt consolidation is very simply a type of personal loan. It is a clever way to combine all your debts into one, making it more practical and convenient to repay and you hope to access a lower rate overall that what you are currently paying. It is not considered to be drastic financial decision like declaring bankruptcy and it will not negatively impact your credit score.

Debt relief refers to ways of reducing your debt through negotiation or legal mean. This could be via credit couselling who helps you set up a debt management plan, negotiating hard with your creditors and creating ‘arrangements’ or even declaring bankrupt.

How Long Does it Take To Get Approved And Funded?

Once you have applied online and completed our form in less than 5 minutes, you will receive an instant decision on the screen with a provisional offer. You can decide if you wish to proceed with this offer and the rate advertized. Subject to further checks, if you have been fully approved, you will typically receive funds of $5,000 or $10,000 or more within 24 to 48 hours.

Does Using a Debt Consolidation Loan Impact My Credit Score?

No, simply applying, being approved and funded for a consolidation loan will not negatively affect your credit score or have a bad impact like debt relief or bankruptcy might. It is just considered another type of personal loan. However, if you miss any monthly repayments and your account goes into arrears, this will cause your credit score to fall making it harder to access other types of finance in the future.

What Are The Alternatives To Consolidation Loans? 401k loan pay interest to yourself

If you are looking to consolidate debts, there are various alternatives such as using a balance transfer credit card which takes debt from one or multiple credit cards and offers a low rate (usually 0%) for an introductory period such as 12 or 24 months.

Another option is to use a 401k loan which helps you to tap into your retirement account and borrow money from your future self, rather than paying a lender or credit union.

Will The Lender Pay Off My Creditors, Or Do I Have To?

When you take out a debt consolidation loan, the lender you are working with can pay off all your debt directly for you — or you can receive the loan upfront and pay off individual creditors and pay specific amounts as per your request.

Can I Save Money Using a Debt or Credit Card Consolidation Loan?

Yes, very much so, if you are able to get approved for a loan with lower rates that what you are currently paying on your loans and credit cards, the savings can be significant, even several hundreds or thousands of dollars per month.