Debt Consolidation Loans

Debt consolidation is promoted as offering people a positive way to reduce credit card debt, payday loans, and other debt and save money at the same time. The principle is to roll all your balances into one convenient personal loan.


Your old credit cards and personal loans are closed, so you only have one monthly payment to think about for your new loan.


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For many people, the convenience of only having one personal loan payment each month is welcomed. It's much easier to remember when payments are due.


You're also less likely to be past due with your accounts with a one monthly payment than you would with multiple due dates to remember each month.


If you are new to debt consolidation, you can read our debt consolidation article for more information.


Can a Debt Consolidation Loan Cost You More Than You Expect?


These loans sound like a great idea. They can work very well in some circumstances.


In fact, they can be a good option for many people for home improvement, or to help pay for existing debt, especially if you have excellent credit and obtain a low-interest rate. You can take advantage of paying less interest on your debt balances each month.


For many people, these loans can lead to even more debt and interest payments.


Unfortunately, there are times when loans could put you in a worse position than you were in the beginning. If you're not careful, it could end up costing you more to pay off your debt than if you'd done nothing at all.

  • Transcript of Are Debt Consolidation Loans Costing You More Than You Expect Video

    Are Debt Consolidation Loans Costing You More Than You Expect?

    Debt consolidation loans are promoted as offering people a positive way to reduce debt and save money at the same time.

    The principle is to roll all your balances into one convenient loan.

    Your old credit cards and personal loans are closed, so you only have one easy monthly repayment to think about for your new consolidation loan.

    If you are new to debt consolidation loans, you can read our Debt Consolidation article for more information.

    For many people, the convenience of only having one loan payment each month is welcomed.

    It’s much easier to remember when payments are due.

    You’re also less likely to be past due with your accounts with a single monthly payment than you would with multiple due dates to remember each month.

    On the surface, debt consolidation loans can seem like a great idea.

    In fact, they can be a good option for many people, especially if you have excellent credit and obtain a low-interest rate.

    You can take advantage of paying less interest on your debt balances each month.

    Unfortunately, there are times when some debt consolidation loans could put you in a worse position than you were in the beginning.

    If you’re not careful, it could end up costing you more to pay off your debt than if you’d done nothing at all.

    The key to choosing the right option for your situation is to understand the type of consolidation loan you’re getting.

    It’s also a good idea to work through some comparison calculations to be sure you’re not paying more than you need to.

    Secured versus Unsecured Debt

    An unsecured loan doesn’t make use any of your assets as collateral for your debt.

    For example, a credit card is unsecured, as you have access to credit without using your car or your home as security collateral.

    In the event that you can’t make your repayments, the lender can’t repossess your assets to repay your debt.

    It’s also worth noting that some unsecured consolidation loans can come with interest rates in excess of 20%.

    The high-interest charges could translate to increased monthly costs out of your pocket overall.

    By comparison, secured loans require that you use an asset as collateral security for your debt.

    Your creditors also have access to your assets in the event of a default.

    Secured loans are usually offered at a lower interest rate than their unsecured counterparts, making them seem more appealing.

    However, the really cheap interest rates are reserved for customers with excellent credit.

    If your credit score is impaired you may find you’re paying a much higher interest rate than you expected, even with a secured loan.

    Comparing Your Options

    The easiest way to know whether a debt consolidation loan is right for your individual financial situation is to compare the total costs.

    There are plenty of good loan comparison calculators available online that let you input your debt balances, interest rates and any other associated fees you’re charged.

    For example, let’s assume you have a total of $22,000 in credit card balances, store cards, student loans and personal loans you want to consolidate.

    Your current minimum monthly payments add up to $516.

    However, keep in mind that you’re only paying the minimum amounts due.

    Debt Type Current Balance Minimum Monthly Repayment Credit Card 1 $5,000 $150 Credit Card 2 $2,000 $60 Store Card $1,000 $30 Car Loan $10,000 $156 Student Loan $4,000 $120

    Totals

    $22,000

    $516

    Now let’s look at what happens if you apply for an unsecured debt consolidation loan.

    If the lender charges you 17% interest over a loan term of 5 years, your repayments will be $547 per month.

    You end up paying more money out of your pocket each month just to cover your repayments.

    However, each payment you make actively reduces your debt levels, so you’ll be debt free in 5 years.

    If you’re already struggling to repay your debt balances, paying more money each month could put a drain on your budget.

    Of course, there’s also the total cost to consider.

    At repayments of $547 per month over a term of 5 years, the total amount you’ll repay to the lender is $32,805.

    That’s $10,205 more than the original amount you borrowed.

    Another alternative is to consider a debt settlement arrangement.

    Many banks, financial institutions, and lenders will happily enter a settlement agreement for a reduced debt balance in the hopes of getting some of their money back from you.

    Before you agree to any debt consolidation loans or offers, take the time to discuss your financial situation with a debt settlement specialist.

    You could reduce your monthly repayments, making your budget easier to manage.

    You could also end up repaying far less than you thought, but the only real way to know is to compare your options accurately before you make a decision.

    Before you make any decisions, you should check out our debt relief program and see if you qualify for our debt settlement plan.

    Pacific Debt has helped thousands of people reduce their debt.

    Since 2002, we’ve settled over $200 million in debt for our clients.

    Contact us today to see how we can help.

How Debt Consolidation Works


If you have multiple high interest debts and you are looking into a loan to pay them off, you must first find the loan amount you need.


This will take at least a good credit score in order to get the best terms. If you do not have a the minimum credit score requirement, you may not be able to qualify for a low interest loan.


Next you need to determine the minimum payments due on the loan. These need to be lower than what you are currently paying. This will allow you to either free up some cash or pay off the loan more quickly. Without a good credit score, the minimum payments can exceed your current monthly payments.


The key to choosing the right option for your situation is to understand the type of loan you're getting. It's also a good idea to work through some comparison calculations to be sure you're not paying more than you need to.


Learn more about debt consolidation companies.

Debt Consolidation Loans Review from Trustpilot

Secured Debt Vs Unsecured Debt


Unsecured loans do not make use of any of your assets as collateral for your debt. For example, a credit card is unsecured, as you have access to credit without using your car or your home as security collateral. In the event that you can't make your repayments, the lender can't repossess your assets to repay your debt.


It's also worth noting that some unsecured personal loans can come with interest rates in excess of 20%. The high-interest charges could translate to increased monthly payment out of your pocket overall. If you are looking at credit card debt consolidation, check your credit card statements for the interest rates.


By comparison, secured loans require that you use an asset as collateral security for your debt. Your creditors also have access to your assets in the event of a default.



Secured loans, like home equity loans, are usually offered at a lower interest rate than their unsecured counterparts, making them seem more appealing. However, the really cheap interest rates are reserved for customers with excellent credit. If your credit score is impaired you may find you're paying a much higher interest rate than you expected, even with a secured loan.

Comparing Your Debt Relief Options

The easiest way to know whether a debt consolidation loan is right for your individual financial situation is to compare the total costs. There are plenty of good loan comparison calculators available online that let you input your loan details like debt balances, interest rates and any other associated fees .


For example, let's assume you have a total of $22,000 in unsecured debts like credit card debt, store cards, student loans, and personal loans you want to consolidate. Your current minimum payments add up to $516. However, keep in mind that you're only paying the minimum amounts due.


Now let's look at what happens if you apply for an unsecured loan. If the lender charges you 17% interest over a loan term of 5 years, your repayments will be $547 per month.


You end up paying more money out of your pocket each month just to cover your repayments. However, each payment you make actively reduces your unsecured debt levels, so you can be debt-free in 5 years. If you're already struggling to repay your debt balances, paying more money each month could put a drain on your budget, even if you managed to get a loan with the lowest rate.


Of course, there’s also the total cost to consider. At repayments of $547 per month over a term of 5 years, the total amount you’ll repay to the lender is $32,805. That’s $10,805 more than the original amount you borrowed.

Debt Type Current Balance Minimum Monthly Payment
Credit Card 1 $5,000 $150
Credit Card 2 $2,000 $60
Store Card $1,000 $30
Car Loan $10,000 $156
Student Loan $4,000 $120
Totals $22,000 $516

"That’s $10,805 more than the original amount you borrowed."

Amount
Borrowed
Rate New Payment 5 Year Term Total Cost
$22,000 17% $547 60 $32,805

There are several debt relief options available in addition to consolidating.


Consumer Credit Counseling


The first debt solution is consumer credit counseling. This means that you meet with a credit counselor who helps you understand basic finances including budgeting. They may also help you set up a debt management plan.


Debt Management Plans


 debt management program is a way to roll all your payday loans and other unsecured debt into one payment. It is not a way to consolidate debt as there is no loan and it is not settlement because you still pay the full amount and full interest.


The monthly payments can be as high, or higher, than the minimum payments a consumer was paying prior to enrollment with the consumer credit counselor.

If you are just starting to get into debt, debt management plans may be your best option.


Debt Settlement


The last option is debt settlement. In a debt settlement program, the debt settlement company negotiates with creditors and debt collectors to lower the interest rate and the total amount owed. Many banks, financial institutions, and lenders will happily enter a settlement agreement for a reduced unsecured debt balance in the hopes of getting some of their money back from you.


Most debt settlement companies deal only in unsecured debt like credit card debt, medical bills, and personal loans. While debt settlement is not for everyone, it can drastically turn around your financial situation.


Pacific Debt is a accredited debt settlement company that has settled over $300 million in debt since 2002. If you are eligible for our debt relief solution and follow through with the requirements, you can expect to be debt free within two to four years.


How Debt Settlement Works


When you enroll in a debt settlement company like Pacific Debt, you immediately stop paying all enrolled debts - even the minimum amounts! This convinces the creditors that you are serious.


Your assigned Pacific Debt certified debt counselor then begin negotiating with your creditors to lower interest and total debt. You make regular payments, based on your budget, to a dedicated bank account. After you build up enough savings, Pacific Debt pays off each creditor.


We do not charge upfront fees (avoid any debt settlement company that charges upfront fees!). We do charge a fee of 15-25% of the total debt enrolled as we achieve results.


During your time with Pacific Debt, you will receive personal attention from your personal account manager and certified debt specialist. In fact, our customer service is legend and we are regularly named as Number One for Customer Service.


Debt Settlement Concerns


Before enrolling in debt settlement, understand the risks. First, you must stop paying bills to convince creditors that you are serious. As a result, your credit report can take some damage. Second, the IRS sees debt forgiveness as income and you will receive some tax liabilities. To avoid too much of an effect from debt forgiveness, speak with a qualified tax advisor.


Before you agree to any loans or offers, take the time to discuss your financial situation with a debt settlement specialist. You could reduce your monthly loan payments, making your budget easier to manage.


You could also end up repaying far less than you thought, but the only real way to know is to compare your options accurately before you make a decision. A debt settlement program can take 36 months to complete but when you are all finished, you could become debt-free.


Before you make any decisions, you should check out our debt relief program and see if you qualify for our debt settlement plan. It could be the perfect debt relief option you've been waiting for!


Pacific Debt Relief


Pacific Debt Relief is an accredited debt settlement company that had been in business since 2002. Formerly known as Pacific Debt, Inc, we are leaders among national debt relief companies.


Pacific Debt focuses on making certain that you understand all available debt relief services so that you can find the best debt relief for your unique financial situation.


Pacific Debt Accreditation


Pacific Debt is an accredited debt settlement company. We are accredited by:


  • Accredited member of the Consumer Debt Relief Initiative
  • International Association of Professional Debt Arbitrators
  • Better Business Bureau

Like all debt relief companies, Pacific Debt Relief is under the oversight of the Federal Trade Commission. Pacific Debt has settled over $300 million in debt since 2002.


Pacific Debt Eligibility


To be eligible for the Pacific Debt Relief program, you must:

Call one of our certified debt specialists for a free consultation!


Our Clients Recommend Pacific Debt


Read what real clients say about Pacific Debt's debt relief services.

  • Better Business Bureau with BBB A+ rating(4.79 rating and 144 reviews)
  •  US News and World Reports and Bankrate ranked Pacific Debt as one of “The Best Debt Settlement Companies of 2020”
  •  4.8 star rating by BestCompany.com (over 2341 client reviews)
  •  4.8 star rating by TrustPilot based (over 718 verified consumer reviews)
  •  ConsumerAffairs.com Accredited (over 538 verified reviews with an average rating of 4.6 stars)
  •  A Top 10 Rated Company by TopTenReviews.com, ConsumersAdvocate.com and Top10debtconsolidation.com
  •  4.6 star rating by Google (83 client reviews)
  •  100% rating by SuperMoney (9 client reviews)

With ratings and reviews like these, it is no wonder that we are a leading national debt relief company.

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FAQs on Debt Consolidation Loans

  • Do debt consolidation loans typically work?

    The simple answer is that debt consolidation loans can work, but there’s no one-size-fits-all solution for debt problems. It depends on your individual circumstances.


    If you have a lot of different debts and you want to simplify your financial life, consolidating your debts into one loan can make things much easier. You’ll only have to make one monthly payment instead of several, and you may be able to get a lower interest rate, which can save you money. 


    However, debt consolidation is not necessarily the best option for everyone. If you have a low-interest rate on some of your debts, it may not make sense to consolidate those debts and end up with a higher overall higher interest rate.

  • Does consolidating your loans affect your credit score?

    Consolidating your loans can affect your credit score. When you consolidate your loans, you're essentially combining several loans into one bigger loan. 


    This can be helpful in terms of simplifying your monthly payments, but it can also have a negative impact on your credit score if you're not careful.


    One thing to keep in mind is that when you consolidate your loans, you'll likely end up with a longer repayment period. This means that you'll be paying more total interest over the life of the loan. 


    Since your credit score takes into account both how much debt you owe and how long it will take you to pay that debt off, a longer repayment period can have a negative effect on your credit score.

  • What credit score do you need for loan consolidation?

    You typically need a credit score of at least 660 to qualify for loan consolidation. Lenders want to be sure that you are a low-risk borrower and are likely to repay your debt.


    If you have a low credit score, there are still options available to you. You can try applying for a personal loan or working with a credit counseling agency to help you get your finances under control. However, these options may come with higher interest rates and fees.


    By consolidating your debt into one loan, you can simplify your monthly payments and make them more manageable. This can be especially helpful if you have multiple loans with different interest rates and terms. Plus, by consolidating your debt, you may be able to save money.

  • What are the disadvantages of debt consolidation?

    There are a few disadvantages of debt consolidation. One is that you may end up paying more interest in the long run because you're consolidating your debt into a longer-term loan. Another downside is that if you miss a payment or default on your new loan, you could damage your credit score even further.


    Before you decide to consolidate your debt, be sure to weigh the pros and cons carefully to see if it's the best option for your situation. And if you do decide to go ahead, be sure to work with a reputable company that can help you through the process and makes sure everything goes as planned.

  • How often can you do debt consolidation?

    You can do debt consolidation as often as you want as long as it makes sense for your financial situation.


    Debt consolidation is the process of combining multiple debts into a single loan with a lower interest rate. This can be a great way to reduce your monthly payments and save money on interest.


    But before you consolidate your debts, it's important to make sure that you can afford the new monthly payment. Otherwise, you could end up in even more debt. So make sure to consult with a financial advisor to find the best solution for your situation.

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