Chloe Meltzer | December 02, 2022
Summary: Are you wondering if that proposed debt consolidation plan will hurt your credit score? Find out if debt consolidation is the right choice for you.
Debt consolidation is the act of bringing all of your debts together so that you can pay one monthly payment, rather than multiple. It is a method used when debts get out of hand. There are two main types of debt consolidation, a debt consolidation loan or a balance transfer card.
Both methods of consolidation are known to help with budgeting, and to lower your monthly payments. Eventually, the plan is that this will lead to paying off debt and raising your credit score. Despite this, it does not come without risks and may cause your credit score to go down at the beginning of your efforts.
Debt consolidation is the act of combining multiple debts into one payment and with potentially lower interest. Not only does this help you to budget better for the future by knowing exactly what you owe, but having a lower interest rate can help to save you money. It also allows you to pay off the debt sooner because more of your money goes towards the actual amount you owe versus interest.
Because any type of credit application will trigger a hard inquiry on your credit report, your credit score may go down before it goes up. If you do notice that your credit score goes down by a few points for a few months, it is not a huge problem. If you practice debt consolidation properly, the overall effects will be positive. Namely, if you continue to pay on time and ensure that you do not stack up debt again.
Respond to debt collectors fast with SoloSuit and win in court.
When using a personal loan to consolidate your debt you are essentially just obtaining a loan to pay off the original debts separately. The new payment will be reflected through your one personal loan payment. It is a simple method of having one payment to pay each month instead of multiple debts.
Personal loan debt consolidation is one of the best options for loan consolidation, and most people will qualify regardless of their credit score. It is actually a great option if you have less than stellar credit. It can also help you to improve your credit score, especially if you have never had a loan before.
There are a few downsides to this type of debt consolidation, if you aren't careful you might sign up for a high APR, and there might be a prepayment penalty. Be aware that after paying off your credit cards, you will have the opportunity to use up that newly freed space. This can eventually lead to more debt that you can't pay off. Additionally, if you miss payments on your new personal loan, it can greatly damage your credit score.
Another option when you want to consolidate your debt is to do so with a balance transfer to a new card. This is essentially transferring the balance from one credit card to another. In doing so, you may be able to obtain a lower interest rate on the new card for a specific time. Some cards might offer 0% APR for a specific amount of time.
It is good to note that your score may initially fall because after a balance transfer, with the reason being “high credit utilization” if the limit on the new card is low. Additionally, you may also need to pay interest if you do not pay off your debt before the 0% APR period is over. Despite this, these payments are more flexible than with a loan, and there is typically no prepayment penalty.
Make the right defense the right way with SoloSuit.
Pulling out a home equity loan or line of credit is placing a loan on the equity that you own in your home. This will then be paid to you in cash. It is considered to be an installment loan or revolving account on your credit score, depending on how your loan is structured. In order to get this loan, you will need to go through a credit check which can negatively affect your credit for a short period of time.
In some cases, seeing a credit counselor might be your best option. Credit counselors can help you to sign up for a plan to manage your debt. This is an alternative method but can give you tools and opportunities to do so. It is a good option if you are looking for something that does not affect your credit score, but instead, wish to negotiate the debt or close credit cards.
Use of a DMP is noted on your credit report while it is in effect, but not after the plan is completed. Debt management plans are placed on your credit report while you go through the process but will be taken off once you complete it.
Use SoloSuit to win your debt collection lawsuit.
Taking out a 401(k) loan means that you borrow money from your own retirement account. How much you are allowed to take out will depend on your employer, but in some cases, you can take out as much as 50% of your savings. Any of the interest that you pay on your loan will go back into your retirement account as well.
If you wish to avoid having any record of your debt consolidation on your credit report, a 401(k) loan might be your best option. This is because it will not affect your credit score. The only downside is that you may cost yourself investment returns. The longer you hold on to the loan the greater the effect will grow.
Debt consolidation can be extremely helpful if you are suffering from a lot of different debt at high interests rates. It is good to mention that it is not a good idea to replace unsecured debt with any type of secured debt. For example, replacing credit card debt with a mortgage or car loan. This could lead to losing your property versus only being in debt.
SoloSuit makes it easy to respond to a debt collection lawsuit.
How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.
"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James
>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate
>>Read the NPR story on SoloSuit: A Student Solution To Give Utah Debtors A Fighting Chance
Here's a list of guides for other states.
Being sued by a different debt collector? We're making guides on how to beat each one.
Is your credit card company suing you? Learn how you can beat each one.
Going to Court for Credit Card Debt — Key Tips
How to Negotiate Credit Card Debts
How to Settle a Credit Card Debt Lawsuit — Ultimate Guide
Need more info on statutes of limitations? Read our 50-state guide.
Why do debt collectors block their phone numbers?
How long do debt collectors take to respond to debt validation letters?
What are the biggest debt collector companies in the US?
Is Zombie Debt Still a Problem in 2019?
If a car is repossessed, do I still owe the debt?
Is Portfolio Recovery Associates Legit?
Is There a Judgment Against Me Without my Knowledge?
Should I File Bankruptcy Before or After a Judgment?
What is a default judgment?— What do I do?
Summoned to Court for Medical Bills — What Do I Do?
What Happens If Someone Sues You and You Have No Money?
What Happens If You Never Answer Debt Collectors?
What Happens When a Debt Is Sold to a Collection Agency
What is a Stipulated Judgment?
What is the Deadline for a Defendant's Answer to Avoid a Default Judgment?
Can a Judgement Creditor Take my Car?
Can I Settle a Debt After Being Served?
Can You Appeal a Default Judgement?
Do I Need a Debt Collection Defense Attorney?
Do I Need a Payday Loans Lawyer?
Do student loans go away after 7 years? — Student Loan Debt Guide
Am I Responsible for My Spouse's Medical Debt?
Should I Marry Someone With Debt?
Can a Debt Collector Leave a Voicemail?
How Does Debt Assignment Work?
What Happens If a Defendant Does Not Pay a Judgment?
How Does Debt Assignment Work?
Can You Serve Someone with a Collections Lawsuit at Their Work?
How Many Times Can a Judgment be Renewed in Oklahoma?
Does Debt Consolidation Have Risks?
What Happens If You Avoid Getting Served Court Papers?
Does Student Debt Die With You?
Can Debt Collectors Call You at Work in Texas?
How Much Do You Have to Be in Debt to File for Chapter 7?
What Is the Statute of Limitations on Debt in Washington?
How Long Does a Judgment Last?
Can Private Disability Payments Be Garnished?
Can Debt Collectors Call From Local Numbers?
Does the Fair Credit Reporting Act Work in Florida?
The Truth: Should You Never Pay a Debt Collection Agency?
Should You Communicate with a Debt Collector in Writing or by Telephone?
What Happens After a Motion for Default Is Filed?
Can a Process Server Leave a Summons Taped to My Door?
Need help managing your finances? Check out these resources.
How to Make a Debt Validation Letter - The Ultimate Guide
How to Make a Motion to Compel Arbitration Without an Attorney
How to Stop Wage Garnishment — Everything You Need to Know
How to File an FDCPA Complaint Against Your Debt Collector (Ultimate Guide)
Defending Yourself in Court Against a Debt Collector
Tips on you can to file an FDCPA lawsuit against a debt collection agency
Advice on how to answer a summons for debt collection.
Effective strategies for how to get back on track after a debt lawsuit
New Hampshire Statute of Limitations on Debt
Sample Cease and Desist Letter Against Debt Collectors
The Ultimate Guide to Responding to a Debt Collection Lawsuit in Utah
West Virginia Statute of Limitations on Debt
What debt collectors cannot do — FDCPA explained
Defending Yourself in Court Against Debt Collector
Arkansas Statute of Limitations on Debt
You're Drowning in Debt — Here's How to Swim
Help! I'm Being Sued by My Debt Collector
How to Make a Motion to Vacate Judgment
How to Answer Summons for Debt Collection in Vermont
North Dakota Statute of Limitations on Debt
ClearPoint Debt Management Review
Indiana Statute of Limitations on Debt
Oregon Eviction Laws - What They Say
CuraDebt Debt Settlement Review
How to Write a Re-Aging Debt Letter
How to Appear in Court by Phone
How to Use the Doctrine of Unclean Hands
Debt Consolidation in Eugene, Oregon
Summoned to Court for Medical Bills? What to Do Next
How to Make a Debt Settlement Agreement
Received a 3-Day Eviction Notice? Here's What to Do
How to Answer a Lawsuit for Debt Collection
Tips for Leaving the Country With Unpaid Credit Card Debt
Kansas Statute of Limitations on Debt Collection
How to File in Small Claims Court in Iowa
How to File a Civil Answer in Kings County Supreme Court
Roseland Associates Debt Consolidation Review
Do Debt Collectors Ever Give Up?
Can They Garnish Your Wages for Credit Card Debt?
How Often Do Credit Card Companies Sue for Non-Payment?
How Long Does a Judgement Last?
How Long Before a Creditor Can Garnish Wages?
How to Beat a Bill Collector in Court