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Advantages and disadvantages of online debt consolidation loans
If you are planning to take a debt consolidation loan to pay off multiple loans, you must have a sound knowledge of its advantages and disadvantages. There are thousands of debt consolidation loans available online and it is vital that you scour through this literature before purchasing one. Listed below are the advantages and disadvantages of online debt consolidation loans.
Advantages of online debt consolidation loans
Makes management of debt payments easy
Online debt consolidation loans enable you to combine multiple loans into one and make single monthly loan payments. It is especially very useful for individuals with multiple credit card loans. By putting all your money in one debt account, you can streamline loan payments and even pay lesser in comparison to paying off individual loans.
Lower interest rates
As there are thousands of companies online, the APRs on debt consolidation loans are very competitive. By choosing a debt consolidation loan with cheaper interest rates, you can save a lot of money on monthly loan repayments. Since most online lenders do not charge prepayment fees, you can even clear off your loans faster with the dollars saved.
Improves credit score
A debt consolidation loan will help you pay off your credit card debts, thus reducing your credit utilization and improving your credit score significantly. On an average, online debt consolidation loans have helped borrowers to improve their credit score by 17 points.
Disadvantages of online debt consolidation loans
People with a bad credit history have a lesser chance of availing a loan
While several online providers offer loans to borrowers with not-so-good credit history, they charge high interests to do so. In order to be eligible for debt consolidation loans with lower APRs, you need to demonstrate a good to excellent credit history and the ability to make monthly loan repayments.
Illegitimate lending websites
In order to apply for a consolidation loan online, you will have to provide important personal information such as your contact details, social security number, credit score., etc. It is highly important that you choose a trusted website before sharing private information.
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