Before you make any financial decisions, especially one as significant as taking out a personal loan to pay down other debts, it’s important to make sure you’re doing everything you can to position yourself for success. This means evaluating the strategy, lender and pros/cons before making your move.- Discover Debt Consolidation
Many borrowers have been able to use debt consolidation loans as a vehicle for bundling their high-interest credit cards together into one, lower-interest installment loan. If you’re also considering trying this strategy, you probably have a few questions — particularly about all the loan options available out there from various lenders today.
Let’s take a look at how we’d go about evaluating a popular lender of personal consolidation loans, Discover.
WhatDoDebt Consolidation LoansInvolve?
It helps to have a solid understanding of what the credit card debt consolidation process entails before shopping around for specific offers. The simplest way to understand a consolidation loan is to think about trading old, high-interest debt for new, lower-interest debt. These loans offer qualified borrowers the opportunity to borrow a lump sum at a more competitive interest rate than they are paying on their other unsecured debts, like credit cards.
Are debt consolidation loans guaranteed to work? Not necessarily. Some risks include:
- Paying more in interest due to an extended loan length.
- Not being able to qualify for low enough interest rates based on your credit profile and income.
- Missing payments or defaulting on the loan before it is paid in full.
- Accumulating new credit card debt while still on the hook for the consolidation loan.
- Giving personal and financial information to a scammer posing as a debt consolidation company rather than working with a legitimate lender.
Is Discover Debt Consolidation Good?
When you’re in the process of shopping around and comparing your options before applying, you’ll probably run across Discover consolidation loans.
Bankrate gives Discover personal loans a 4.8 out of 5 rating as of 2021, with the missed points coming from the “availability” category. This is likely due to the fact borrowers need to have a 660 credit score or higher to qualify. While some lenders are willing to work with a larger range of credit scores, Discover sets the minimum bar for approval rather high from the outset.
One desirable aspect of Discover loans in particular is their lack of origination fee, which is a fee lenders sometimes charge just to process borrowers’ applications. There’s also no prepayment penalty, which is great for borrowers who are able to come up with additional funds and pay off their loans faster than originally anticipated so as to save on interest.
Other pros worth mentioning, according to WalletHub, include:
- With an income requirement of just $25,000, a majority of Americans would be eligible based on their annual pay.
- Annual percentage rates (APRs) range from just under 7 percent up through 25 percent, and loan amounts range from $2,500 up through $35,000.
- Customers generally seem satisfied with the terms and service provided by this company.
As you can see, whether or not a Discover consolidation loan is good depends on criteria like credit score, income and loan length. A borrower who can only qualify for an interest rate of 20 percent might come to find they’d end up paying more in interest going this route — while another borrower may crunch the numbers and figure out they’d be able to save a lot of money. Generally, though, this company has consistently high ratings from third parties.
Always do plenty of research before choosing a debt relief strategy and then again before selecting a lender.