Are you inquiring about how to consolidate credit card debt with bad credit?
Consolidation and Paypal loans are a phone call away, and many online lenders issue loans to consumers with bad credit. For example, Lending Club, Avant, Sofi, and Upstart offer debt consolidation loans for bad credit.
Banks even offer subprime consolidation loans; Discover and Capital One will loan to consumers with credit scores of under 700.
But what’s the risk of a debt consolidation loan?
The biggest risk of a debt consolidation loan is the cost.
Debt consolidation lenders often disguise and hide upfront fees and high-interest rates by offering a low monthly payment and charging the fees directly from the loan that the bank provides.
For example, if you borrow $50,000, lenders may charge you an upfront $5,000 but take it from the actual loan.
So, in other words, you’ll see $45,000 get deposited into your bank account from a $50,000 loan.
Many consumers don’t realize how much they’re really paying in fees on a loan because the fees don’t actually come out of their pocket, they come out of the loan and are built into their “low monthly payment.”
A $50,000 Debt Consolidation Loan Can Cost You $121,531.10 in Interest Over 11 Years.
Don’t be fooled into an expensive online loan because they offer you a small monthly payment and label it as “savings.” Are you saving any money here? A calculator will reveal the truth.
For example, on $50,000 in credit card debt, when paying minimum payments (i.e., around 2%-3% of your balance), your monthly payments could add up to approximately $1,450.
You then contact Lending Club or an online lender. They offer you a debt consolidation loan to pay off the $50,000 in credit card balances that would result in a monthly payment of $1,300, as shown in the screenshot above from a debt calculator.
You get excited; “Wow, I can borrow all this money and end up with a monthly payment saving me $150 per month!” Slow down, not so fast there!
Debt consolidation loans can include interest rates above 30% while still providing you with a lower payment than what you’re currently paying.
So on a $50,000 loan, you pay $5,000 upfront and $121,531.10 of Interest over the next eleven years, at a monthly payment of only $1,300.
Rick Sorrentino, a Debt Counselor at Golden Financial Services, says:
“There are times where a loan is like taking medicine that doesn’t cure an illness; it just keeps some of the pains & ailments in control.” If you’re interested in a debt resolution program contact Rick Sorrentino directly at (619) 773-0904.
How can lenders get away with this highway robbery?
Online lenders (also known as Fintechs) work with banks and other primary lending institutions. Most online lenders don’t fund the loan directly; they only market and sell it.
Online lenders will partner with banks that loan the money. Banks partner with online loan websites, like Upstart, because it helps them get more business from consumers searching for a loan online.
Also, companies like Upstart help qualify candidates for a loan. They use artificial intelligence and other loan criteria to screen applicants eligible for a loan, making it easier for banks to issue more loans.
But you, the consumer, is the one that pays the extra fees.
Online lenders mark up the cost of the loan, and consumers sometimes pay more than twice what the actual cost of the loan would be if they went directly to a credit union or a bank to borrow the funds.
Some online lenders are becoming banks themselves, including Lending Club and Sofi, but most are not banks.
How to protect yourself from ripoff loans with high fees and Interest:
To protect yourself from loan scams and high-interest loans, make sure to clearly understand all fees and interest rates associated with a loan. Check the small print, and don’t skip reading a word on that loan agreement!
Specifically, check the loan terms. Add up all the Interest getting charged. Understand what fees are getting charged upfront.
Lastly, check reviews for debt consolidation companies online—review complaints in detail.
Best Place for a Debt Consolidation Loan
Deal directly with a bank, and preferably your local credit union.
You may want also to explore “Buy now, pay later” or BNPL.
Compare all of your options.
And always use a calculator to figure out how much you will pay over the long term before applying for a loan. Click here to use Golden Financial’s online debt calculator tool.
Ready to learn a better way? Contact Golden Financial Services today. Call (866) 376-9846 and discover the best debt consolidation loan alternatives!