Payoff: Best Debt Consolidation Company For Credit Card Debt
Reasons to avoid
Payoff is the debt consolidation company that seems to have your best interests at heart. Focusing purely on credit card debt, Payoff wants to help people get their finances back on track, and then make sure they don’t veer off the road again. Psychologists and scientists are both on Payoff’s payroll as part of the effort to promote healthier financial habits among its customers.
As to the actual consolidation of debt itself, the application process is straightforward and there’s a soft inquiry ‘Check my rate’ option to ascertain your eligibility before you apply proper. Unsurprisingly, there is support readily at hand both online and over the phone should it be required.
The origination fee, which could be as high as 5%, might deter some, and higher loan amounts and swifter turnaround times are probably available elsewhere, but Payoff is transparent in everything that it does. For some people, they might also be willing to pay slightly over the odds or wait a little longer for their funds simply to try and gain from the extra support that Payoff has to offer. Welcome calls and regular check-ins are all part of a debt consolidation service that takes a proactive approach to helping its customers.
Consolidate Via A Personal Loan
The process starts by obtaining a personal loan, using the proceeds to pay off your credit card balances, and then repaying the loan with fixed monthly payments for the loan duration. Personal loans typically provide you with a lower interest rate and a smaller monthly payment compared to credit card interest rates.
You can use the money you save to pay your other bills, make needed purchases or add to your savings. Consider keeping all but one of your credit cards in the drawer while repaying the loan, and only use that one card for purchases that youll pay off in full on the next payment due date.
In this way, your total debt will decline, and your credit rating will rise. Thats a good idea.
What Is Debt Consolidation
If you are over-indebted and falling behind with your debt repayments, debt consolidation can protect your assets by arranging a structured, affordable repayment plan for your outstanding debt.
A debt solution company consolidates all your debt into one monthly payment and reduces your interest rates, based on your circumstances. This debt protection forms part of the National Credit Act. if you go under debt consolidation. This means that aside from the protection of your assets, you will also end up paying less for your debt on a monthly basis.
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Best Debt Consolidation Loans Of December 2021
- Best for Fair Credit: Payoff
- Best for Bad Credit: Avant
- Best Customer Reviews: Best Egg
- Best for Good Credit:
- Best for Fast Funding: Rocket Loans
- Best Peer-to-Peer Lender: Peerform
LightStream is the online lending division of SunTrust Bank. LightStream offers rates starting as low as 5.93% on personal loans for debt consolidation. The rates will vary though by amount of loan and duration of the loan.
If you qualify, the lender may let you borrow up to $100,000. When you add in the benefit of no fees, LightStream may be an affordable option to consolidate other high-interest debts.
Rates as low as 5.93% on debt consolidation loans when signing up for auto pay
LightStream guarantees to beat any qualifying rate from another lender
Good credit is recommended
No pre-approvalsyou must allow a hard inquiry of your credit report to check your rate
Other important information:
Read the full review: LightStreams Personal Loans
Warnings To Heed When You Consolidate Credit Card Debt
These are the biggest pitfalls that consumers run into when they consolidate credit card debt.
The biggest mistake people make after consolidating credit card debt is that they dont stop making new credit card charges. If youre trying to pay off debt, you need to focus on elimination. New charges just set you farther back from your goalits like two steps forward, one step back.
A Consolidated Credit client named Carol ran into this problem when she consolidated on her own using a balance transfer credit card. She used the card to consolidate her debt, but she hadnt balanced her budget. As a result, she ran up new balances quickly.
The right way: Before you consolidate, you need to set up a household budget. The goal is to cover all your bills and necessary expenses with income. This helps you avoid relying on your credit cards to cover everyday needs. If you cant cover all your daily expenses without credit, then consolidating your debt has a higher chance of failure.
For consolidation to be effective, you need to reduce or eliminate interest charges applied to your debt. Otherwise, you dont generate the cost savings you need for this to be an effective way to eliminate your balances. This means you need at least a good or excellent to qualify for do-it-yourself debt consolidation at a good, low-interest rate.
The right way: If you owe more than $30,000 or have a bad credit score, consolidating on your own can be tough. You may be better off asking for help.
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Consider Other Debt Relief Options
If you can’t afford to pay off your credit cards, consider other alternatives, like settling them on your own or with the help of a legitimate credit counseling agency or lawyer, or filing for bankruptcy. By negotiating, you might be able to get a discount on the total debt owed, arrange for more favorable payment terms , or get the creditor to remove negative information from your credit report. If you need help negotiating with creditors or debt collectors, consider talking to an accredited, nonprofit credit counseling agency or a reputable attorney rather than hiring a for-profit debt management service. With a bankruptcy, you might be able to eliminate your credit card debt.
Should I Consolidate My Credit Card Debt
There are several situations where consolidating your credit card debt might be a good idea, such as:
You can get a lower interest rate.If you consolidate your credit card debt, you might qualify for a lower interest rate than what youve been paying. This could save you money on interest as well as potentially help you pay off your debt faster.
You need a lower monthly payment.Personal loans typically come with repayment terms from one to seven years, depending on the lender. Choosing a longer term can reduce your monthly payment and lessen the strain on your budget though keep in mind that extending your term means youll pay more interest over time.
You have multiple debts to manage.Consolidating your credit card debt will leave you with just one loan and payment to worry about. You also have the option to consolidate other types of debt with a personal loan, not just credit cards for example, you couldconsolidate billsor other loans.
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Should I Consolidate My Debt
There are several markers that tell you when debt consolidation is a good idea. Those markers include:
- When you have a steady income that exceeds your monthly expenses
- When the interest rate on your debt falls, preferably to 8% or less
- When you qualify for a 0% interest rate credit card
- When the monthly payment is an affordable part of your household budget
- When those payments actually reduce the balance owed each month, rather than just meeting the minimum amount required
- When you can pay off your chosen route consolidation loan or the debt management program in less than five years
If you want to be responsible with your money and you want to step away from credit card dependence, you need a plan. Debt consolidation is a plan.
It simplifies bill paying. One affordable payment, once a month, to one source. If you do that, your balance drops and, given time, your credit score rises.
Eventually, you can breathe again financially.
Best Loans To Consolidate Debt In 2021
At Experian, one of our priorities is consumer credit and finance education. This post may contain links and references to one or more of our partners, but we provide an objective view to help you make the best decisions. For more information, see our .
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Home Equity Loan For Debt Consolidation
Home equity loans can also be used to pay off high-interest credit card debt at a lower interest rate. To qualify for this type of loan, youll typically need to have at least 15% equity in your home. Calculate your home equity by subtracting the amount you owe on your mortgage subtracted from your homes value.
When you open a home equity loan, youre putting up your home as collateral to the lender. This can grant lower interest rates than with unsecured forms of debt, like personal loans and credit cards, but it also comes with a large amount of risk. If you dont repay your home equity loan, you could lose your home.
Borrowing against your retirement savings using a 401 loan is one way to pay off credit card debt. 401 loans allow you to borrow up to $50,000 or half the vested amount, whichever is less. Youll have up to five years to repay the loan, and you must make payments at least quarterly.
Best For Bad Credit: Avant
Avant, through its relationship with WebBank, offers and services personal loans for qualified borrowers. The company has issued over 800,000 loans since it was founded in 2012.
Personal loans from Avant may be a good fit for middle-income borrowers who dont have perfect credit histories. Rates start at 9.95% and climb up to 35.99%. Thats admittedly high compared with the APR range some other lenders offer. Yet bad credit borrowers could potentially save money with an Avant personal loan versus other high-rate financing options, like credit cards.
Avant performs a soft credit inquiry when you first check your loan rates and terms
Easy-to-use app lets you manage your account on a mobile device
Upfront administration fee comes directly out of your loan
Late fees and dishonest payment fees
Other important information:
Read the full review: Avant Personal Loans
Compare The Best Debt Relief Companies
|15% to 25% of total enrolled debt||Debt settlement on credit cards, medical debt, unsecured personal loans, department store credit cards|
|28 months||Not disclosed|
|Average of 20% of enrolled debt and between 15% and 25% of enrolled debt||Debt settlement on unsecured debt like credit cards, payday loans, and some private student loans|
|Best for IRS Debt and Back Taxes||$5,000||20% of total enrolled debt||Debt settlement on unsecured consumer debt, business debt, IRS debt, and back taxes|
|Best for Quick Debt Relief||$10,000||15% to 25% of total enrolled debt||Debt settlement on unsecured consumer debt|
|Best for Credit Card Debt||Not disclosed||Average of 24 to 48 months||18% to 25% of total enrolled debt||Debt settlement on credit cards|
|One-time setup fee of $0 to $50 and monthly fee of $0 to $75|
Work With A Nonprofit Credit Counseling Organization
can review your entire financial situation and work with you to create a plan to tackle your financial challenges. They give advice about credit issues, budgeting, money management and debt management.
If you work with a credit counselor, its important to research the organization before you get started. Check with your state attorney generals office and consumer protection agency to ensure its reputable.
Pros: A credit counseling organization may work with your to set up a debt-management plan on your behalf, which requires you to make a single monthly payment to the credit counseling organization each month. The organization then uses the money you provide to pay your creditors. Your credit counselor may also work with your creditors to negotiate lower interest rates or waive certain fees.
Cons: Some credit counselors may charge a fee for some of their services, and you may have to agree not to apply for new credit or use your existing credit if you participate in a debt-management plan.
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What Does Apr Mean
Annual percentage rate is the actual cost youll pay for taking out a loan. Your loan APR includes both your interest rate and any fees charged on the loan, such as origination fees.
The APR on credit cards tends to be higher than personal loans, which means you might be able to get a lower APR by consolidating your credit card debt with a personal loan. And unlike credit cards, personal loans generally come with fixed interest rates, so your rate and payment will stay the same throughout the life of the loan.
Avoid These Types Of Companies
You want to avoid debt relief and debt management companies. There are legit companies in this sector, but they can be expensive.
To save money, consolidate your debt yourself. Yes, doing it yourself takes effort. But give it a try first with the companies we recommend.
Debt management companies charge a monthly fee between $50 and $100. These companies will negotiate lower rates for your credit cards and other loan debt. And they will help you apply for a debt consolidation loan.
So they do help you. But in truth, you can do both of these tasks yourself.
For the convenience, these companies are better than nothing. If its the only way to consolidate your debt, do it. Having someone else make a plan for you to get debt-free is better than staying in debt.
You might also consider these companies if you have sub-prime credit. That is a credit score below 580. Most banks wont lend you money with a credit score below 580.
Debt management companies can lend you money to refinance credit card debt at a lower interest rate.
If you go this route, verify the company is legit. Ask the National Foundation of Credit Counselors. For many, this is the leading agency for credit counselors.
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Top Credit Cards For Fair Or Average Credit
Upgrade Visa® Card with Cash Rewards: This hybrid credit card/personal loan product is an interesting option for people with lower scores. Read our review of the Upgrade Visa® Card with Cash Rewards.
Upgrade Bitcoin Rewards Visa® Credit Card: The card combines features of credit cards and personal loans, and it earns 1.5% back in the form of Bitcoin when you make payments on your balance. Read our review of the Upgrade Bitcoin Rewards Visa® Credit Card.
Capital One Platinum Credit Card: Build credit and be automatically considered for a higher credit line in as little as six months. Read our review of the Capital One Platinum Credit Card.
Debt Consolidation Loan Vs Balance Transfer Credit Card
One popular alternative to a debt consolidation loan is a balance transfer credit card. A balance transfer credit card is a credit card that offers a 0% APR introductory period, which typically ranges from 6 to 20 months. You can use a balance transfer credit card to consolidate debt by putting your existing debts onto the credit card and paying it off before the introductory period expires, thus paying no interest on the balance.
The biggest draw of a balance transfer credit card is paying off the balance before the introductory period expires and, consequently, paying no interest at all. Having a plan to pay off debt is even more important when using a balance transfer card, or youll be stuck with high APRs once the introductory period ends. The best balance transfer cards are typically available only to those with good or excellent credit, making them less accessible than personal loans for those with poor or fair credit.
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How Do I Pay My Debt If I Live Paycheck To Paycheck
If you are living paycheck to paycheck, then the idea of getting out of debt may seem impossible. With careful thought and planning, you can get out of debt. You may need to examine your expenses and see what areas are causing you to spend every dime you have right up to the point that your next check comes.
Maybe there really is no place where you can cut costs and you are spending all of your money on legitimate expenses. If you have exhausted all the ways you can cut excess spending, you may need to consider an additional source of income.Do you have an excessive wardrobe that can manage a downsizing? You might be able to make some quick extra cash to pay down some credit card debt by selling some of your clothing on Facebook Marketplace or other social media platforms. Can you work as a rideshare consultant on the weekends? Using your vehicle to deliver passengers, cargo, or food in your spare time may be an option for you. Whatever you choose to do to make some extra money, doing so will create a little breathing room for you where you can then begin to use those funds to pay down your debts.