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United Settlement » Debt Consolidation » Is a Debt Consolidation Loan Right for Me?
marcel February 5, 2019

Is a Debt Consolidation Loan Right for Me?

A debt consolidation loan (DCL) consolidates multiple debts into one single loan, typically resulting in a lower interest rate and monthly payment. A DCL provides the dual benefit of streamlining the repayment process while simultaneously lowering interest expense and the total amount repaid over time.

Types of DCLs include personal loans, promotional low-interest rate credit card balance transfers, home equity loans and student loan consolidations. DCLs are popular for the convenience and debt savings that they provide, but they’re not for everyone. Is a debt consolidation loan right for you? Let’s take a closer look.

Debt Consolidation Loans

Debt consolidation fixed-rate loans are available through banks, credit unions, and online lending sites – however, those individuals with excellent credit scores of 700 or higher should investigate debt consolidation through promotional zero percent interest rate balance transfer offers on credit cards.

Though these low introductory rates often expire within twelve to eighteen months and usually come with balance transfer fees of 3-4%, every dollar paid on them applies toward reducing a debt balance. Ideally, the amount of debt requiring consolidation will fit within the credit limits of such a promotional offer and be paid in full prior to the introductory rate adjusting upwards.

However, in those scenarios when a greater amount of debt requires consolidation or when an individual’s credit score isn’t strong enough to qualify for a promotional offer, a fixed-rate DCL from a bank, credit union, or online lender can make sense.

Debt Consolidation - Things to Know

Debt consolidation requires organization, patience, time and money. Organization means taking the time to Itemize all bills – credit card, medical, utility, and any other unsecured debt, and to total all necessary expenses – rent, groceries, transportation, etc.

Before determining the amount remaining that can be allocated toward a single monthly payment on a DCL. In a debt consolidation loan scenario, the debtor borrows enough funds to first pay off all unsecured debts (credit cards, medical bills, some student loans), thereby simplifying multiple monthly payments into one single monthly payment at an overall lower blended interest rate.

However, it is important to know in advance whether your cash flow is sufficient enough to cover the cost of the monthly payment on a fixed rate DCL. As a rule, the total amount of your debt should not exceed 50% of your annual income – otherwise it could make better sense to pursue alternate forms of debt relief that include debt settlement, a debt management plan, or even bankruptcy.

Conversely, if the total amount of your unsecured debt is low enough that it can be effectively paid off within twelve months, it’s likely better to simply stay the course and not pursue debt consolidation. However, if you do wind up pursuing debt consolidation, savings achieved through a DCL offer the advantage of being non-taxable – as opposed to any debt savings of over $600 achieved through debt settlement that is taxable as ordinary income.

It is also important to know that DCLs can result in longer repayment schedules, depending upon the reduced size of the monthly payment.

Spending Habits Matter

It is vitally important for a debtor to adjust away from the poor spending habits that led to accumulating debt in the first place – otherwise any debt consolidation loan won’t really work in the long-run. Old habits die hard – and spending habits are no different.

It is important to recognize whether you are the type of individual who can exercise the self-discipline necessary to curb extra spending on restaurants, high-end clothing, sporting events and other luxuries that simply need to be avoided until your debt problem is relieved.

If you lack this self-discipline, think twice about debt consolidation. DCLs are good in that they provide a timeline and a pathway out of debt – but only when the individual behaves responsibly.

However, if you’re the type of person who can adjust, live frugally for a while acting responsibly, a debt consolidation loan can be right for you. Furthermore, debt consolidation loans are not necessarily bad for a credit score – on the contrary, they can be good for a credit score when a debtor makes regular, timely payments against the DCL.

However, any late or missed payments will quickly cause harm to a credit score and profile. Nonetheless, the potential benefits of debt consolidation do outweigh the potential negatives, so if you’re looking to simplify the repayment process on several unsecured debts while saving money on interest expense over the long-term. a debt consolidation loan could indeed be right for you.

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Annette Huggins

March 14

That when it seems like nobody can help United will.

This was a great experience for me. I am just starting but Madelene Gallon made me feel like we were friends for years. She tried to make me feel that she would help me and make sure I got the best deal...

Kiirstin

March 01

Kind and caring

Had been searching for a while for a company I could trust to get me out of crippling debt. Really didn’t think it was possible. Spoke to Ben at United Debt and he assured me that not only was it possible,...

Kiirstin

March 01

Kind and caring

Had been searching for a while for a company I could trust to get me out of crippling debt. Really didn’t think it was possible. Spoke to Ben at United Debt and he assured me that not only was it possible,...

Dylan

February 28

Quick, easy assistance!

I've been working with Ben at United Debt to help me organize and get out of debt for once - I've been dealing with debt for ages and Ben showed me some simple ways to begin dealing with things to keep...

Takota Carrie

February 14

I need help

I really appreciate

JONICA Amber PIRON

December 21

Great!

Renika went above and beyond today to help me. She is wonderful to work with! Thank you again Renika for all of your help today! Happy Holidays to you!

Jayvon

December 20

Paying back

They where great listeners

Shawn abetha

December 14

Everything

Thanks

Robert Phillips

November 23

Do your home eork

Paid several thousand dollars and nothing done. Ended up settling 90%by myself. This is a preatory company. So do your homework. This will never post.

Dm

November 18

Customer service is truly helpful

Renika was so helpful. My account was paid off but I kept receiving notifications. She cleared up the situation.

Jose Rosa

November 16

Great Customer Service

Renika did a wonderful job handling my questions and transactions. She is very patient on the phone and took care of my needs accordingly.

Russ

November 03

Very helpful

Renika did a great job in answering all of my questions in a timely manner. She was polite and friendly. Keep her on the payroll.

Anthony Desoto

October 31

What's Important to me is United Settlement Costumer service !

United Settlement Costumer service is Amazing Everyone is Professional . I am so happy choosing them with my card Debt. thank you all for helping me out .

Ri cky

August 23

That this company has integrity!

A responsive company that keeps it clients up to date and fully informed. I like the fact that I can send them a text and be guaranteed an answer within 24 hrs.

Jerry Bolandis

June 04

Professional and focused on facts and truth not hype. Excellent. We want to know facts.

Great work very professional and great updates. Communication is excellent.

janice head

October 25

trust them

Excellent. Also each time i call there they treat me with respect even though they are probably thinking jerk . You sure have made mess of your life. but they have been taught to smile smile smile. this...

Scott W O'Neill

August 01

Thanks for all your help and negotiations.

Thanks for the update! I have faith in you guys and will continue my payments. Thanks for all your help and negotiations.

Cassandra Robinson

July 30

That A Settlement Was Entered.

I Absolutely Love You All At United Settlements. You All Have Saved My Credit Solutions. I Would Refer Everyone To You Services.

Mildred Yvonne Sherron

July 16

The results of the settlement attempts.

So far, I have found United Settlement more than satisfactory. Very conscientious and very efficient in providing a service in debt settlement. Thank you and all the members of your team who are assisting...

Diana Cardona

July 16

Tough Financial Hard Times During Covid-19

I signed up with United Debt Settlement because of large credit card debts, which had taken a financial toll on my credit. UDS has an outstanding reputation assisting clients like me achieve financial recovery...

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    Clients who stay according to debt relief program can realize approximate savings of 50% before fees, or 25% including fees, over 24 to 48 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete our program for reasons such as: their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period. We do not assume consumer and/or business debt, provide tax, bankruptcy, accounting, legal or credit repair services/ advice. Our program is not available in all states. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. If you have any additional questions please contact us. NMLS ID: 1947026
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