Grace Enfield, Content Writer
Debt consolidation loans are better than debt consolidation programs overall. Debt consolidation loans can help you save money, get out of debt sooner and simplify your finances, while trusting the wrong type of debt consolidation program can lead to significant credit-score damage.
Pros & cons of personal loans for debt consolidation
Pros of Personal Loans
Cons of Personal Loans
No collateral required (usually)
Possibility of origination fees
Approval for up to $100,000+
High maximum APRs
Payoff periods of up to 84 months
Not many options for bad credit
You can visit WalletHub's best debt consolidation loans page to see the top ranked offers.
Why debt consolidation programs aren't as good
- Some services are debt settlement in disguise
- You will have to pay fees to the consolidation company
- You may suffer credit score damage
Some companies say they have debt consolidation but actually offer debt settlement programs. These programs try to negotiate a lump sum payment of a portion of your debt and have the rest forgiven. They also typically don't pay your creditors until after you default, which damages your credit score.
On the other hand, with a reputable debt consolidation program, you make a monthly payment to the company and it distributes this payment to your creditors. At the same time, the program works to negotiate with your existing creditors to get you lower rates. A reputable debt consolidation program is a good idea when you need extra guidance and assistance managing your debt.
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