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How to Get the Lowest Interest Credit Card Consolidation Loan

Credit Card Consolidation Loan

If credit card debt is making you feel like your image should accompany the word “overwhelmed” in the dictionary, you need to do something. You’ve considered a consolidation, but don’t know how to get the lowest credit card consolidation loan. Here’s how.

Debt Consolidation

This is a common remedy for people like you. It involves taking out a loan to pay off high-interest debts such as credit cards. It streamlines bill paying and, if done right, should lower your interest rate and monthly payments.

The issue is that interest rates on consolidation loans can range from as low as 5% to up to 36%. The average personal loan rate as of Feb. 17 was 9.94%. Debt consolidation only makes sense if you can snag a loan with a rate that’s less than what you’re paying aggregately now on your credit cards. Most people who have problems with plastic are paying an interest rate of about 25%, which piles up fast if you can’t pay the card off at month’s end.

How Loan Interest Rates Work

Most lenders employ a risk-based pricing model when deciding whether to green light your application and at what interest rate. The likelier you are deemed to repay the loan, and on time, the lower your interest rate. On the other hand, you may get a higher rate or have your application rejected if lenders, when checking your credit history, consider you too risky. Get help at https://www.bills.com.

How to Improve Your Chances of Getting a Low Rate

Improve your credit score. This is the No. 1 way to get a better rate. If you don’t need the cash this minute and have a few months to work with, consider trying to raise your score. 

People with credit scores of at least 740 get the best rates on these loans. The lower your score is, the more interest you’ll pay. Scores below 660 will result in a high rate, although perhaps not as high as the rate you’re paying on your plastic.

You may want to check your score using a free credit monitoring service, which also lets you see what affects your score. You can address areas that need work once you know them. Even a slight upward tick can save significant money.

You also want to be sure everything in your credit profile is accurate, since mistakes can negatively affect your score and result in a higher loan interest rate.

Improving your score gets you a better rate on conventional debt consolidation loans and can also enhance your eligibility for other kinds of low-interest loans from an online lender, credit union, or bank. 

How To Get a Low-Interest Consolidation Loan

You can apply for a loan through a bank, credit union, or online lender. If you have a relationship with your bank, go ahead and give it a try. You can often get a better rate at a credit union because these institutions are nonprofit and have a structure that puts a premium on members’ needs.

If you’re going the online lender route, stay with those that are reputable and scour the fine print about interest rates. Also, be sure to apply for a fixed-interest loan; a variable interest rate loan could make the loan’s total price higher.

You should also know about any fees that come with the loan, including those for origination – loan processing — and early termination. Such fees could wipe out savings from what at first blush seemed like a good interest rate.  

So, now you have an idea of how to get the lowest-interest credit card consolidation loan. Knowledge is power. Now, take the first step toward a new life of financial health.

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