Top 5 Best Debt Consolidation Options In 2023 | Check Detail

best debt consolidation options

Because of the availability of several creditors, getting out of the debts become challenging nowadays. If you feel like juggling different payment amounts, accounts, and due dates and you feel like chipping away at an iceberg, then it is the right time to take consideration of the debt consolidation options.

Debt consolidation is the method of rolling several debts in a single payment. It helps you to pay off the debts faster, save money in interest, and simplify the finance and offer you peace of mind. If you have a mountain of student loans or medical bills, maxed out the credit cards, then it becomes necessary to know the best debt consolidation option.

There are 5 best options for debt consolidation, like:

  • Balancing of transfer credit cards.
  • HELOC (Home Equity Line Of Credit) or home equity loans.
  • Individual loan.
  • Associated loans.
  • Debt managing plans.

One requires to know the advantages and disadvantages of these alternatives and make smart choices. Let’s check the 5 best debt consolidation options that are available in 2020.

Top 5 Best Debt Consolidation Options

Balancing of transfer credit cards

One requires to balance transfer credit cards with the limit that is responsible for accommodating the balances which are rolling again and again and make an annual percentage rate (APR) as low as possible to make it worthwhile. There are balance transfer cards which are available at a very low-interest rate and with zero interest too for the initial period of 18 months.

A balance transfer card is the best debt consolidation option for those who want to pay off the balance before the initial rate expires and who do not want to rack up into the new debts. 

Advantage

It is available with ease and quick ways than taking bank loans. One can save a lot of interest money by paying the balance before the expiry date of initial rates. These cards let one transfer balances, but it should be below the limit of new credit cards. Credit cards are unsecured; therefore, noo collateral is needed to qualify for it. 

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Disadvantage

These balance cards usually charge up to 3-5% of the amount transferred. If your initial rate date expired, then the card will revert the variable APR, which is considerably higher. One can not have the same bank’s card balances; that is why one needs to apply for new credit cards that will lead to hard pull on your cards report, which can lower one’s credit score.

HELOC (Home Equity Line Of Credit) or home equity loans

The term Home Equity is the difference between the value of the home and how much one owes on their mortgage. If you have enough equity value and good credit report history, then one can easily get various equity at a reasonable price; therefore, it is one of the best debit consolidation options that are available in 2020. Several home equity buyers use the money to pay debts of higher interest like credit cards and much more. 

Advantage

The interest rate of home equity loan is lower than personal loans or credit cards, and the amount of loan tend to higher than credit card limits or personal loans. There are several traditional home equity loans that have fixed monthly payments of fixed-rate, that make budgeting easier. The repayment can be range from 5-30 years, provide buyers plenty of time for repaying the debts.

Disadvantage

When one moves to the home equity, the homes are collateral which secures the debts. If you do not have a job, then it makes it difficult to pay loan payment, and a lender can take the home by foreclosure. There is a variable interest rate of HELOCs, and sometimes a small interest rate can strain to adjust tight budgeting. The long repayments can give you relief, but it may cost you in long runs. These HELOCs take more time to qualify and end to a home loan as compared to other kinds of credit.

Individual loan

An individual loan can be the best debt consolidation option if one wants to qualify in low-interest loans, have funds that can help you to cover their debts and repayment term with ease. The individual loan is unsecured; that is why the rate and borrow limit can hinge to one’s credit profile.

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Advantage

There is no need to use any assets like your car or home to qualify for the personal loan. The interest rate of individual loans is fixed and lower as compared to the credit cards. The monthly payments are easier for budgeting and fixed. The individual loans are accessible from credit unions, online nonbank lenders, traditional banks, online banks, and peer-to-peer lenders. These loans can some time to qualify for an individual loan and get the funds.

Disadvantage

The lower rate of individual loans needs excellent credits, and its rate higher as compared to other home equity loans. If you have a low credit score, the individual loans can cost higher than credit cards. There are several individual loans that have a penalty fee for late-payments and pay off the loan before the final term. Scams are subprime lenders that charge rates and fees to clients with bad credit.

Associated loans

Associated loans have leading platforms like Prosper, SoFi, Upstart, LandingClub, and personal investors for unsecured loans that range from $20,000 to $ 40,000. Just as individual loans, associated loans are also unsecured; therefore, the borrower’s credit history can play an important role for terms, fees, rates, and borrowing limits. Higher the credit score, lower the interest rate, and one can easily borrow more money.

Advantage

The tainted credit borrowers find it more comfortable to get loans through an associated network instead of any traditional financial institutes. These associated loans are used for anything that one requires. The processor of application and approval is very quick as everything is proceeding through online methods. The first application for associated loans triggers a soft pull to the files, and it does not influence anybody’s credit score. 

Disadvantage

The rate of associated loans is much higher as compared to home equity loan rates, and one needs to pay the loans in less time. Several associated loans have a penalty fee for late payments, and some come up with the origination fees. Therefore, it becomes necessary to read all the documents and know what you are getting and what it takes from you.

Debt managing plans

If one wants the best debt consolidation option that does not need to take a loan or apply for the credit card, then the choice of the debt management plan can be correct for anyone. With the help of debt managing plans, one can work with any nonprofit credit counseling agency and draft pay plans. One can close their credit card accounts and make the monthly payment accordingly. To generate a debt managing plan, stick with nonprofit agencies that are affiliated with the Financial Counseling Association of America, or the National Foundation for Credit Counseling (NFCC), and ensure that debt counselor should be certified from Council on Accreditation.

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Advantage

Using the debt managing plans, one can get some of the best debt consolidation options and exceed their credit limits. There are few credit counseling agencies that work for you to provide proper planning. If you appropriate debt managing plans, then you do not need to rack up for more debts. If one does not go deep inside the debts, these plans can help to enhance credit score for the long term.

Disadvantage

Taking debt managing plans to do not lower down the balances. Have a credit account for debt managing plans can lower the credit score. Therefore, ensure that one does not get confused debt management with “debt settlement,” which is illegal in a few states. They can collect their money over time, and if you put them in trust, then they might be credits to a settlement offer.

Tips to avoid falling into debts

  • Try to avoid impulse purchases.
  • If one uses the credit cards, pay the amount monthly to avoid high-interest charges.
  • Stay away from the offers like “interest-free financing” and “buy now, pay later”, that leads you to debt charges.
  • Make a budget plan and stick to it. Purchase according to your needs.
  • Before going to a big purchase, shop around the lowest prices.
  • Keep track of your bank balances and organize purchases accordingly.
  • Put some percentage of your earning to swept to your savings.

Conclusion

If one has to borrow some money to consolidate debts, try not to subprime lenders who are catering to the clients with bad credits. This blog has provided the best debt consolidation options that include balancing of transfer credit cards, HELOC, individual loans, associated or peer-to-peer loans, and debt managing plans. This blog also has tips that help to avoid falling into debts, follow all these tips to save your money. Select the above-mentioned options as per your requirements.