Introduction
You started your company with big dreams. And while life throws us curve balls from time to time, nothing should get in the way of your plans. Debt repayments and cash flow issues can appear relatively suddenly – which is why understanding the best lending companies for debt consolidation is essential.
In this article, we’ll explore the ins and outs of debt consolidation, how to choose the best lending companies for debt consolidation, top tips when applying for a debt consolidation loan, common pitfalls to avoid, and critical information to be aware of.
What Is Debt Consolidation?
Debt consolidation is when you take out a new loan in order to pay off existing loans.
So for example, if you owe Providers A, B, and C $10,000 each – a total of $30,000 – you could take out a loan from Provider D for $30,000, pay off the original lenders, and have a single provider that you’re now paying off.
There are many reasons why business owners choose to consolidate their debts, which can have significant benefits.
The Benefits of Debt Consolidation Loans
The benefits of debt consolidation loans include:
- Simplification: Instead of dealing with multiple providers, agreements, terms, and repayment schedules, you can now consolidate everything into one simple payment plan
- Potentially lower interest rates: In many cases, the new loan you take out to pay off existing debt is repayable at a lower interest rate than the original loans, which has tremendous benefits including the chance of lowering the overall cost of the loan
- Improved cash flow: Debt consolidation often reduces monthly repayments, freeing up cash to reinvest and grow your business
- A credit score increase: By consistently paying off your debt consolidation loan, you could boost your business’ credit score
- The predictability of fixed repayments: Knowing exactly how much you will be paying and when empowers you to plan ahead for success
- Peace of mind: Multiple loans bring worries that can compound, from juggling creditors and repayment schedules to dealing with agreements and other paperwork
- Better terms in some instances: In taking out a debt consolidation loan, there’s the chance of negotiating improved terms like longer repayment periods
The Downsides of Debt Consolidation
Debt consolidation can be a useful strategy for managing multiple debts, but it does have some potential downsides. Here are some of the key disadvantages:
- Interest rate risk: If the consolidation loan has a higher interest rate than your current debts, you could end up paying more in the long run. Even if the monthly payment is lower, the total cost over time could increase.
- Fees and costs: Some debt consolidation loans come with upfront fees, closing costs, or other expenses that can add to the cost of the loan. These fees may offset any savings from a lower interest rate.
- False sense of progress: Consolidating debt can create the illusion that you've solved your debt problem when, in reality, you've only restructured it.
While debt consolidation is the right answer for some business owners, for many others it is not – especially when it comes to MCAs. In such cases, debt settlement could be the best option, and Coastal Debt Resolve are the leaders in this field. This involves negotiating with MCA providers and reaching a settlement agreement that enables you to get your business back on its feet and rebuild for long-term success.
Meet Coastal Debt Resolve - Easy, Fast, And Secure Business Debt Relief Solutions
Coastal Debt Resolve fights for entrepreneurs and small and medium-size businesses. The company’s goal is to ensure your business continuity and continued growth, by swiftly and securely resolving your debts without damaging your credit history.
The company’s experienced and helpful professionals will assist you in settling your debts, ensuring you get the best deal possible.
With hundreds of positive reviews, an unmatchable track record, and a reputation as being the ones to fight for your best settlement outcomes, Coastal Debt Resolve is justifiably considered among the elite providers for commercial debt settlement.
Call (888) 707-7177, get started online, or email info@coastaldebt.com
How To Choose The Right Lending Company For Debt Consolidation
If you are set on debt consolidation, and are assessing how to choose the best lending companies for debt consolidation, the following steps are helpful:
Step 1: Start with your own needs
It’s worth asking yourself the following questions:
- How much do I need to borrow in total?
- What’s most important to me: the interest rate, repayment period, maximum loan amount, or another factor?
- How quickly do I need to finalize the transaction?
- Do I prefer a completely online process, or dealing with human agents?
Step 2: Begin your research
Compare different providers. Investigate both specialized debt consolidation providers, as well as traditional lenders such as banks and credit unions. In general, specialized providers offer a quicker turnaround time though rates may be higher; while traditional lenders may place greater emphasis on a high credit score.
Step 3: Compare rates
While there are a number of important elements to investigate when considering debt consolidation, arguably the most critical is the interest rate – a lower rate can significantly affect monthly payments and total interest paid.
Step 4: Watch out for hidden fees
Make sure you know what you’re getting into. Double check and confirm all fees and charges before signing. Important terms to look out for include origination fees, application fees, and early payment penalties. Unscrupulous lenders can lure you with an attractive interest rate, only to claw back this benefit through inflated fees. Similarly, familiarize yourself with the general terms and conditions of the loan is critical.
Step 5: Check reviews
Look up the provider’s reviews on reputable platforms such as Trustpilot. Don’t settle for a company with a rating of under 4.7 stars, and at least 150 reviews.
Step 6: Ensure you’re protected
Throughout the process, ensure you’re being explained everything you need to know, and that questions are encouraged – and not avoided.
The 3 Best Lending Companies For Debt Consolidation In 2024
We’ve curated the top 3 best lending companies for debt consolidation:
1. Banks such as Wells Fargo or PNC
Why they’re popular: As well-known institutions, popular banks such as Wells Fargo and PNC offer loan consolidation options. While there are many drawbacks to going through a commercial provider, some people value the familiarity of dealing with a bank.
Interest rates and terms: Interest rates can range from being competitive to relatively high
Pros and cons: The pros of big banks include stability, familiarity, and in some cases, competitive rates. Cons can include the need for high credit scores, long processing times, and little flexibility.
Contact details: Contact the local branch of your preferred bank.
2. U.S. Small Business Administration (SBA)
Why they’re popular: The SBA offers a special program called the SBA 7(a) Loan Program. It’s a loan that can be used to refinance – or consolidate – existing debt.
Interest rates and terms: While this will depend on individual circumstances, interest rates from SBA-associated loans can be lower due to the fact that the SBA guarantees a portion of the loan. Terms can also be longer, ranging from ten to twenty five years (if loan is secured with real estate).
Pros and cons: Pros are the often attractive interest rates and payment terms. Cons include specific and strict eligibility requirements, the need for personal guarantees in some cases, a lengthy and often complex application process, and restrictions on how the loan can be used.
Contact details: Contact the SBA here. Note that the SBA doesn’t provide loans directly, but works through third-party providers.
3. Online Providers of Business Debt Consolidation
Why they’re popular: Unlike traditional banks, online providers often have more lenient qualification criteria. Additionally, the application process is typically faster and more streamlined, with many lenders offering quick approval.
Interest rates and terms: Interest rates for online business loans can vary widely, typically ranging from 7% to 30% or higher, depending on the lender, your creditworthiness, business revenue, and the loan amount. The terms of online business loans also vary. Short-term loans may have repayment periods of 3 to 18 months, while longer-term loans can range from 1 to 5 years.
Pros and cons: Online lenders offer quick application processes, fast approval, and flexible loan options, making them an attractive choice for business debt consolidation, especially for businesses that may not meet the strict criteria of traditional banks. However, these advantages often come with higher interest rates, shorter repayment terms, and potential fees, which can increase the overall cost of borrowing and strain cash flow. The quality of lenders also varies, so businesses must carefully research and choose reputable providers to avoid potential pitfalls.
Contact details: For example, one of these providers is Kabbage (now part of American Express). They can be emailed at kabbagesupport@americanexpress.com.
Preparing to Apply for a Debt Consolidation Loan
Some debt consolidation loan providers have more rigorous, time consuming and resource-intensive processes, so it’s worth finding this out before embarking on your debt consolidation journey.
In general, the following tips can be helpful in ensuring you’re fully prepared for the process:
- Check your credit score (ensure you do so in such a way that your actual score is not affected, known a s “soft inquiry”)
- Gather relevant documentation such as financial statements
- Be aware of the loan types available: secured (collateral required), unsecured, SBA 7(a) loans
- During and after the process, do your utmost to maintain and even improve your credit score
FAQ
How do I qualify for a debt consolidation loan?
This will depend on the provider, but generally all that’s required is a relatively good credit score, a steady income, and a reasonable debt to income ratio.
How much can I save with debt consolidation?
This will differ from person to person and the rates available – as well as the interest rates of the original loans being consolidated. For reference purposes, clients of Coastal Debt Resolve using other solutions have enjoyed up to 57% in savings.
What fees are associated with debt consolidation loans?
Generally, fees may include origination fees, application fees, and early or late payment penalties.
Summary
We explored the world of debt consolidation, while also exploring alternatives such as debt settlement; which in some cases can slash total debt and repayment amounts, and give you the restart you need to flourish.
Commercial debt settlement could be just what you and your business need to position yourselves for future success.
If you’d like more information or to speak with a debt settlement professional, call (888) 707-7177 now, or get started online at https://www.coastaldebt.com/get-started.
Disclaimer: The information provided in these marketing materials is for general informational purposes only and is not intended as legal advice. While we strive to ensure that the content is accurate and up-to-date, it should not be relied upon as a substitute for legal advice.
Frequently asked questions
This will depend on the provider, but generally all that’s required is a relatively good credit score, a steady income, and a reasonable debt to income ratio.
This will differ from person to person and the rates available – as well as the interest rates of the original loans being consolidated. For reference purposes, clients of Coastal Debt Resolve using other solutions have enjoyed up to 57% in savings.
Generally, fees may include origination fees, application fees, and early or late payment penalties.
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