If you’re currently struggling with debt, you might consider using a debt consolidation loan to help streamline your payments and get rid of multiple creditors. But can you use a debt consolidation loan to pay off creditors or not? Here’s what you need to know.
What is a debt consolidation loan?
A debt consolidation loan is a type of loan that helps you pay off your debts by consolidating them into one loan. This can help make your payments more manageable and reduce the number of creditors you have to deal with. There are dozens of companies that offer debt consolidation loans, but you need to pay attention to their terms and conditions. If you’re not sure which loan vendor is best, use Credello’s recommendations for debt consolidation loans as a jumping-off point to help direct you.
Who is eligible for a debt consolidation loan?
Anyone who is eligible for a traditional credit card or other forms of debt can generally qualify for a debt consolidation loan. This includes people with low credit scores, no credit history, and even people who have had their credit ruined by bankruptcy.
Can I use a debt consolidation loan to pay off creditors?
Yes, you can use a debt consolidation loan to pay off creditors. However, you should be aware of the terms and conditions of the loan. Make sure that the company you choose has a good track record in consolidating debt and will help to reduce your overall payments. Also, make sure that you understand how the debt consolidation loan will affect your credit score. If you have poor credit, using a debt consolidation loan could damage your credit rating further. The damage done will only be temporary, though it may be worth the hit to get you out of debt sooner than trying to pay off your debts without the loan.
However, there are a few exceptions. You generally can’t use a debt consolidation loan to pay off student loans or medical bills. For these types of debts, it’s typically best to seek outside help with a credit counseling service or work with the creditor directly to establish a payment plan.
How much can you borrow with a debt consolidation loan?
The amount you can borrow with a debt consolidation loan is typically based on your total outstanding debts and credit score. The higher your score, the more you can borrow. Typically, you can borrow up to 80% of the total amount of your original debts with a debt consolidation loan.
Can debt consolidation loans be used to pay off creditors?
Yes, debt consolidation loans can be used to pay off creditors. However, be sure to read the terms and conditions of the loan carefully. Some lenders require that you pay off your creditors directly through them before you receive the remaining balance, while others will just send the entirety of the loan money directly to your bank account.
The bottom line
A debt consolidation loan can be a great way to get out of the red and save money. Be sure to read the terms and conditions of the loan carefully before you sign up.