Yes, online debt consolidation absolutely is a thing. Moreover, it’s worth investigating when you think this approach to getting a better handle on your financial obligations might make sense. Working through the process over the ‘net can often be less intimidating than speaking face-to-face with another individual.
So now that you know it can work, here’s what to expect.
Online debt consolidation can often be less intimidating than speaking face-to-face with another individual.
Data You’ll Need to Get Started
It’s a good idea to know just exactly how much you owe — and how much of that you’d like to consolidate. Generally, credit card debt best lends itself to consolidation. However, medical debt and other forms of unsecured obligations can be consolidated as well.
Make a list of all your outstanding balances, their interest rates, and the amount of the monthly payment on each. Next, you’ll need to calculate the amount you can afford to pay toward a loan of this nature each month. Creating a monthly budget (if you have yet to do so) will reveal exactly where you are financially. In so doing, you can avoid committing to a solution you’ll struggle to support.
You’ll also need to know your credit score. The best interest rates are reserved for those who have the highest credit scores. This factor can make or break the success of your consolidation plan. After all, if you’ll have to pay a higher interest rate than your current average, there’s a good chance that doing a consolidation will actually set you back. Get copies of each of your three credit reports to ensure the information they contain is accurate too. Correcting discrepancies could raise your credit score.
Deciding Which Consolidation Method to Use
An online credit card consolidation can take several different forms. You can apply for a balance transfer credit card, get a personal loan, use the equity in your home, or enroll in a debt management program. The first three choices require having a strong credit rating in order to be worthwhile. The fourth one can usually be helpful regardless of your credit score.
- Balance transfer credit cards combine as many of your outstanding credit card obligations as possible onto one card — usually with an interest rate as low as zero percent for a period of up to 24 months. This is wonderful when you can pay off the entire transferred balance within that window. However, it can be expensive if you cannot. You will also find that transfer fees and interest charges applied to purchases will be at a much higher rate.
- Personal loans, because they are unsecured, will usually come at a higher interest rate. Thus, you’ll need to make sure that rate is less than your current aggregate rate. Also, because they are unsecured, you’ll need to have a very strong history of managing debt responsibly. You’ll also need to confirm an income capable of consistently servicing the loan, while meeting all your other needs.
- Home equity, in the form of a refinance or a line of credit, generally has the lowest monthly payments. Qualifying is usually easier too, because you’re pledging your home as collateral if you default on the loan. As enticing as the affordability is, most financial experts advise against trading unsecured debt for secured debt. Be certain you can repay this loan if you decide to take this option.
- Debt management programs can get you a lower interest rate. They can sometimes get fees waived as well. You’ll have a fixed monthly payment and a finite window within which your debt will be cleared — if you stick with the program. The downsides are monthly fees, which can reduce the amount you’ll save. You will also agree to freeze your credit accounts to avoid creating new debt while you’re in the program.
Is Online Consolidation For You?
Again, yes, online credit card consolidation is absolutely a thing. Moreover, the programs function like in-person ones. However, you do have to be extra careful because you’ll be sharing sensitive financial data over the internet. This could open the door for scammers. Before you decide on a strategy, take some time to weigh the pros and cons of each to be certain your decision will ease your burden, rather than add to it.
Have you ever used online credit card consolidation?
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