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Loans can be fun. Really. A mortgage means you’re about to step inside your new house. Loans for cars, vacations, weddings, and honeymoons all go toward exciting life events. But, this is not why most people use loans. The most common reason to borrow money is to pay off what you already owe. These "debt consolidation loans" don’t have the glitz and glamor of other financial products, but they are necessary for those unready for a looming due date.
If you need to combine a few bills into a bigger loan, we can help. Just fill out our brief questionnaire and we’ll try to pair you with one of our reputable lenders. Our lenders offer loans for up to $35,000. Here are five considerations to make before using this type of financial product:
Have you ever let a bill slip through the cracks and ended up having to pay penalty fees? Having just one big loan can help you avoid this type of situation. You can focus on one due date and make sure you pay the required amount, rather than trying to remember, prioritize, and address several debt sources.
But, you’d be naïve to think you’ll only have one loan for long. At LoanStart, our loan terms start at 24 months. Chances are within two years you’ll borrow more money.
Depending on the debt you currently owe, you may be able to get an APR rate that’s less than what you are currently paying. That’s not guaranteed, of course. Many personal loans are for those with less-than-stellar credit, and so a loan may include a higher-than-average. The higher rate can help the lender fund the occasional default that comes along with lending to those with lower credit scores.
The good news for you is that you’ll be able to see your personal loan’s APR rate before you need to sign anything.
If any of your outstanding debts have penalties attached to them, then it makes sense to pay them off sooner rather than later. Those penalty fines can be expensive and most of the time that money won’t go toward paying off your loan. It’ll be an extra fee on top of what you already owe.
When you get a personal loan to pay off other debts, you’ll be able to close some other loans (up to the dollar amount of the personal loan borrowed), thus helping you avoid some of those late payment fees. But before you do that, you should make sure none of those smaller loans have a prepayment penalty attached to them. If they do, you’d probably be better off paying that loan off according to the payment plan you initially set up with the lender. Just be sure to make the payments on time.
Many people find great relief by securing a personal loan to help them pay off past debt. But you need to remember that you aren’t getting rid of any debt. You’re just moving the debt around. You’ll still need to pay back the money. But if having one, big loan helps you feel better about the money you owe, then we’re happy to help you have less stress in your life.
Pro Tip: You probably won’t be able to get a loan for the exact dollar amount that you need. And there’s a chance you may get more. If that happens, we recommend lumping that extra money on top of your first payment so you can cut down the principle of the loan. That way you won’t accidentally spend that money and end up even more in debt than you already are.
If you transfer debt from a few maxed-out credit cards into one personal loan, then you might be able to start using those cards again. Be careful, though. You’re going to need to be able to pay off your personal loan. If you have credit card payments on top of your loan payment, you risk digging yourself into greater debt.
A personal loan can help you get your life back on track. But if you want to have success with your loan, then you’ll need to set up a good plan of action. You need to figure out how you’ll be able to pay back all of the money you borrow without missing a single due date. We hope you’re able to make the most of your personal loan. If you have any questions, please feel free to reach out to us. We love to help.