What are Wells Fargo's debt consolidation loan options?

The best way to consolidate debt is to take out a new loan or credit card that has a lower APR than all of the original debts and then use it to pay off the original debts. This turns multiple monthly payments into one and reduces the cost of the total amount owed, allowing the borrower to get debt-free sooner. The best debt consolidation options will not charge any fees to complete this move, either.… read full answer

Best Ways to Consolidate Debt

• Credit card: Doing a balance transfer to a credit card is the best way to consolidate debt when you owe a relatively small amount and will be able to pay it off within a year or two. Balance transfer credit cards typically have credit limits of $500+, and introductory 0% APRs on balance transfers tend to last for 1 to 2 years.
• Home equity loan: A home equity loan is the best way to consolidate debt if you’re a homeowner who owes a lot and needs a long time to pay it off. It’s also a good choice if you want to score the lowest APRs possible for multiple years. Home equity loans are much cheaper than personal loans on average, but they require the borrower’s house as collateral. So you have to be confident in your ability to repay a home equity loan.
• Home equity line of credit (HELOC): A HELOC is the best way to consolidate debt for people who want to borrow multiple times without applying for a new loan. HELOCs have a draw period during which the user can borrow, up to their available credit, at any time. HELOCs also require a house as collateral, which means there’s a lot of risk for borrowers.
• Personal loan: A personal loan is the best way to consolidate debt for people who can’t/won’t use a home as collateral but still need more funding than a credit card might provide. Plus, personal loan APRs are often lower than the regular APRs on credit cards, so they’re also good for balances that can’t be repaid quickly. Personal loans usually take only about a week to get, too, so you can consolidate sooner than with a home equity loan or HELOC.

Best Way to Consolidate Debt Without Hurting Your Credit

The only way to consolidate debt without any credit score damage is having a friend or family member pay it off for you, then owing the debt to that person. That said, debt consolidation doesn’t usually affect your credit much.

Applying for a loan or line of credit should only drop your credit score by 5 to 10 points. And even if debt consolidation hurts your credit in the short term, it can lead to large long-term gains. You’ll be able to reduce your debt load more quickly and build up a good payment history, both of which will help your score.

Other Ways to Consolidate Debt

There are a few other ways to consolidate debt, but they’re not ideal. The first is to use a debt consolidation program. With this option, you don’t take out a loan. Instead, you make one payment per month to a company, which distributes the funds to your creditors. The company also negotiates on your behalf to try to get lower rates. But you’ll have to pay fees to the company, and you may suffer credit score damage because the program might not negotiate with creditors until you have missed a few payments.

Another option is to borrow from your retirement account. But you’ll end up having to pay interest into your account to make up for the time the money wasn’t invested. In addition, you’ll need to pay the loan back in 5 years or face an early withdrawal penalty. The timeline moves up if you lose your job, too. In that case, you’d need to pay the money back by the tax day for the year in which you lost your job.

Ultimately, the best way to consolidate debt for most people will be a personal loan because it provides decent funding amounts and APRs without requiring any collateral. To check your chances of getting approved for a personal loan, along with what rates you might qualify for, use WalletHub’s free pre-qualification tool.

Personal loans affect your credit score in the short-term and in the long-term. In the short-term, a personal loan may damage your score because it causes a hard credit inquiry and increases your debt load. But in the long-term, a personal loan can either help or hurt your credit, depending largely on whether or not you pay the bills on time. Ultimately, it’s up to you how much impact the personal loan will have.… read full answer

How a Personal Loan Affects Your Credit Score:

• Does temporary damage with an initial hard inquiry. When you first apply for a personal loan, your credit score will immediately take a small hit. That’s because applying for a personal loan triggers a hard inquiry into your credit history. But this shouldn’t drop your score by more than 5 points or so, and you should be able to bounce back quickly.
• Adds to your overall debt. If you’re approved for a personal loan, you will immediately have a higher debt load, which may cause your credit score to drop in the short-term. That’s because the more debt you have, the riskier it is for banks and credit unions to lend to you.
• Reports to the major credit bureaus monthly. The banks, credit unions and online lenders that issue personal loans report payment information to the major credit bureaus on a monthly basis. If you make on-time payments, you can expect your score to increase. But if you are late or don’t pay altogether, your score will drop.
• Improves your credit mix. Proving yourself capable of managing multiple types of loans and lines of credit responsibly is good for your credit score. It shows you can be trusted to repay what you borrow in a variety of situations. So if you only have one or two other types of accounts on your credit report, such as credit cards or student loans, your score may benefit in the long run from getting the personal loan.
• Could help reduce credit utilization. Personal loans give you a lump sum up front, which you pay back in monthly installments. This is different from a credit card, where you can borrow up to a certain amount any time you want. Credit cards are known as “revolving credit,” and a big part of your credit score is how much of your revolving credit you use up each month, or your “credit utilization ratio.” Personal loans don’t count toward this ratio, so if you use them to pay off revolving debt, you can lower your ratio and improve your score.

In conclusion, as long as you’re sure to pay on time each month, a personal loan should eventually increase your score by a lot more than the initial inquiry caused it to fall. You can also avoid wasting hard inquiries by getting pre-qualified for a loan first. Pre-qualification only uses a harmless soft inquiry. And while it doesn’t guarantee approval, it will let you know if your odds are good.

A credit card consolidation loan is a good idea if it reduces the cost of your debt and allows you to repay what you owe sooner than you would otherwise. Furthermore, a credit consolidation loan is the best choice if it will save you more than the top balance transfer credit cards… read full answer.

Credit card debt consolidation loans help put all your balances in one place. But they’re not worth it unless you also get a reduced interest rate relative to what you’re currently paying. Checking with a personal loan provider to see what rates you’re pre-qualified for should give you an idea of whether you’ll actually save money if approved.

If you can qualify for a balance transfer credit card that will accommodate all of your debt and provide a 0% introductory interest rate for 12+ months, that may be a better choice. That’s easier said than done, however, so it’s a good idea to keep your options open.

Credit card consolidation loans are a good idea when they:

1. Save you money on interest.
2. Help you get out of debt sooner.
3. Offer a better deal than balance transfer credit cards.

If you can’t find a credit card consolidation loan that will save you money, or qualify for any good balance transfer cards, there are a few alternatives to consider. A secured personal loan or home equity loan could get you lower rates, but at the risk of losing your property/home if you default. A loan from a friend or relative could get you low rates but could put stress on your relationship. Finally, other debt solutions like settling with your creditors may be helpful.