Banks that Offer Debt Consolidation Loans
If you are considering a debt consolidation loan, where do you think the best place is to find one?
This is not a credit card balance transfer—where you transfer high interest credit card balances to a lower interest rate credit card. A debt consolidation loan is a regular loan.
As such, the best place to get one is at a full service financial institution like a bank, credit union or savings and loan. There are two types of loans you can receive to consolidate your debts:
- Unsecured Loans: These loans do not require any type of collateral. They rely on the credit worthiness of the borrower. Right now, these are not the type of loans that will generally be available to consolidate debt.
What might help approval of an unsecured loan is a co-signer. This provides the bank with more security for the loan because the co-signer is responsible for the loan if you default on the payments.
- Secured: This is where an asset, like a home, car, boat or combination thereof is put up as collateral for the loan. A home equity loan is especially good for a debt consolidation loan. Of course, if you default on a secured loan, you will lose the asset you pledged to it.
There are two advantages to taking out a home equity loan to consolidate your debt:
- Currently, the average interest rate on a 30 year fixed mortgage is 4.0%. The current average interest rate on all variable credit cards is 14.39%. Even if you do not have a 30 year fixed home loan, chances are that your home loan has a much lower interest rate than any of your credit cards.
- The interest on the home loan may be tax deductible. This has the effect of further reducing your interest rate.
Financial Institutions Offer Debt Consolidation Loans
If you are having a difficult time paying off your student loans, there is a special government consolidation loan department that on consolidates student loans. As with the home equity loans, these loans are sold and serviced by local banks and other full service financial institutions.
So, as with most things financial in life there are many varieties of loans products, interest rates and loan terms. This means that when you shop for a debt consolidation loan, make sure you are really diligent in doing the research to find the best loan for your situation.