Not all debt consolidation companies have the same working principles and methods. There are different methods that suit different companies and loan types. You may have tried debt consolidation before, but that does not mean the same method will work for you once again. You need to assess your current financial situation to decide which method will suit you best.
It always up to you, the consumer to sort through all the available choices and determine which debt consolidation method suits their interest best. Most of the leading companies have in-house debt counseling to assist their consumers. While a few of them are known to refer their customers to exclusive debt counseling companies and experts.
According to Forbes, debt consolidation is a financial chore that you need to address at least once in your lifetime. You may be a business owner or the star-employee of a corporation, but debt may have gotten you by your ankles at least once in your life.
When do you need debt consolidation?
When you are nose deep in debt and you are paying at least 5 different interest rates to different companies, you should know that you need debt counselling. Debt consolidation is the goal of counselling where all your debts are coalesced into one with a flat, low rate interest.
What should you check before going for debt consolidation?
Here are a few points you should always remember before signing up for any debt consolidation loan:
i. It can provide temporary relief. The term period of the relief is often determined by your own spending habits. A small, single loan term often spread over a long time period can miraculously reduce the payments.
ii. Make sure that your new loan causes no damage to your credit records. This is quite rare with many debt settlement and debt consolidation companies.
How do you pick the best debt consolidation company?
The best company isn’t the one that gets you the biggest loan amount. There are more than just one factor you need to consider and that includes transparency, fees and customer support. Here are a few things you should definitely consider before hiring your debt consolidation company –
i. Accreditation: all good debt counselling and consolidation companies are accredited by American Fair Credit Council (AFCC). You might want to look for other certifications and accreditations including Better Business Bureau (BBB) and International Association of Professional Debt Arbitrators (IAPDA).
ii. A clear policy: the first impression is hardly personal anymore. Most companies have an online presence. Company websites are like business cards and you have the complete right to judge the expertise of a company from its website. A professional company with experience will likely have a minimalist, formal website with its experience enlisted without revealing its client list.
iii. Years of business: you should go for a company that has been in business for longer than just a few months. Debt consolidation companies that have been in business for over a few years have reputation to uphold and are less likely to engage in dishonest business as compared to newbies that have just started out.
iv. The area of service: most debt consolidation companies also have debt counselling and debt settlement services. Most of these services include credit card debt settlement and medical bills. But only the ones with more than a couple of years of experience and true expertise will also include business debts, student loans and secured debts.
v. Upfront fees: many debt consolidation companies charge a processing fee. This is usually a fixed percentage of the total consolidation amount. This should be mentioned while you are applying for the debt consolidation loan. In any case, all other fees including the defaulter’s fee should be discussed by the company before you make any official commitment.
The concept of debt consolidation loans usually stays the same across state borders. The interest rates and the processing fee vary from state to state and even between cities. The best debt settlement company in state A may not be the best for you in state B. however; here is a collection of the most trusted debt consolidation companies that have been catering to companies over the last few years –
i. Lending Club: this is the USA’s biggest peer-to-peer lender. It usually sanctions between $1000 and $40,000 with APRs starting from 5.99%. Although it requires a credit score of 640; that is higher than most places and credit unions. The Lending Club also charges a $15 processing fee every time you pay by check.
ii. Upstart: this one is ideal for most new business ventures. Most new businesses don’t have the long line of good credit that can qualify them for bank loans and credit union consolidation loans. Upstart is usually their hero without a cape who can give them loans between $3000 and $25,000 with variable APRs between 6.68% and 24.58%.
iii. PersonalLoans.com: this is one of the few portals that connect you with lenders in all the 50 states of US. APRs can vary between 5% and 36% for all loans up to $35,000. Since it is a portal, you can find various lending offers that include installment loans, bank loans and peer-to-peer loans. The website is something to look out for. It is informative and completely intuitive for all users ranging from novice to pro.
Choosing the right kind of payment and the right company are very important for all consolidation loans. You must look for a company that offers competitive interest rates, reasonable fees, and transparency in transactions, wide range and flexibility in terms and has good reviews. Before you sign on any document you should read their terms and conditions of payments (often in fine print) very carefully.
Stories by Isabella Rossellini