Two of the challenges Americans cite when it comes to dealing with debt are as follows: It’s complicated and it’s expensive. To make matters worse, the complication factor only increases the more outstanding balances you have. While the average American has approximately four credit card accounts, many people have more — plus personal loans and medical bills to boot. This can make the monthly process of making payments very complex as you juggle different due dates, balances and interest rates.
Speaking of interest rates, the second reason why getting out of debt is so tough is because interest can cause your balances to keep growing. This often makes it feel like, even though you’re funneling as much money as you can manage per month at your debts, your efforts are barely making a debt.
Debt consolidation is a process meant to address these challenges by making it more straightforward and less costly to eliminate debts. Using a special type of personal loan called a consolidation loan — available from credit unions, banks or private online lending companies — is one way to do so.
What is debt consolidation with a lender like OneMain Financial like? Keep reading to learn more.
What to Expect from the Debt Consolidation Process
Debt consolidation via loan entails, well, taking out a loan to immediately pay down your other obligations. Then you are responsible for making fixed monthly payments on said loan until you have fulfilled the terms of your contract. The potential advantage here is that you may be able to qualify for a personal loan with a lower interest rate than your current debts, particularly if you’re a borrower with strong credit.
According to Value Penguin, the average APR on a consolidation loan is about 22.5 percent. However, interest rates can be as low as 6 percent… or as high as 36 percent. The largest determining factor on APR is the strength of your credit history. Borrowers can also expect their credit history to determine their likelihood of being approved for a loan by lenders.
The repayment timeline for a debt consolidation loan depends on its amount, plus the monthly payment to which you agree to make. Two to five years is a fairly typical repayment window, although certain loans can run longer or shorter.
What to Know About Working with OneMain Financial
OneMain Financial is an example of a consolidation lending company. Looking up OneMain Financial reviews, like this one from Bills.com, reveals the following need-to-know information about this company’s loan products:
- APR: 18 to 36 percent
- Amount of loan: $1,500 to $20,000
- Loan length: Two to four years
- Origination fee: Yes, 1 to 10 percent
- Minimum credit rating required: N/A
- Speed of loan: As short as 24 hours
CNBC calls OneMain Financial a “fair-credit” lender because the company does not require a certain minimum credit score to qualify. However, you’ll notice the APRs offered are on the average to high side of the spectrum, indicating this company typically works with those who have bad-to-fair credit — likely not extremely poor nor extremely high. Another thing worth noting about this company is that they do allow secured loans in which the borrower puts up a piece of property — usually a vehicle — as collateral in exchange for easier approval and lower APR.
This overview of debt consolidation and OneMain Financial gives you an idea of what to expect from the process in general and, more specifically, whether or not you may be a fitting candidate to apply for a personal loan through OneMain Financial. Comparing lenders and choosing the right option will save you time and hassle — and increase your likelihood of successfully consolidating from start to finish.
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