During the height of the housing boom, borrowers had no problem taking out home equity loans to consolidate their debt. The value of homes was rising and homeowners found themselves with additional equity that could be borrowed against. Although those days have passed and many are finding themselves underwater on their homes, it’s still possible to get a debt consolidation loan, but not from where you might think.
Prosper.com and Lending Club, peer to peer lending companies, are offering debt consolidation loans that are capitalized by individual investors. Both companies offer three and five year fixed-rate loans. Although both companies offer loans for just about any purpose, the vast majority of borrowers take out loans on their sites to consolidate their debt and lower their interest rates. Because the loans you get from Lending Club or Prosper.com is fully-amortizing, after making either 36 or 60 payments (depending on which loan type you choose), your debt will be fully paid off. There’s no getting stuck in a cycle of only paying the minimums and finding yourself in debt forever.
You can usually get a better interest rate form Lending Club and Prosper.com than you could if you were to borrow money from a bank and you’re definitely getting a better interest rate than you would otherwise pay on high-interest credit cards. Lending Club offers loans as low as 7% to borrowers with great credit. The average interest rate that borrowers pay is around 9%, which is a great deal compared to the 29% interest rates that mega-banks are charging consumers on credit cards. Since you’ll be paying a lower interest rate, more of your payment will be going toward the principal balance making it so that you get out of debt faster.
In order to qualify for a debt consolidation loan with Lending Club, you’ll need a credit score of at least 660. Lending Club also lists the following requirements on their website: “at least 3 years of credit history, showing no current delinquencies, recent bankruptcies (7 years), open tax liens, charge-offs or non-medical collections account in the past 12 months, no more than 10 inquiries on your credit report in the last 6 months, a revolving credit utilization of less than 100%, and more than 3 accounts in your credit report, of which more than 2 are currently open.” Borrowers from the following states cannot currently get a loan on Lending Club: Iowa, Idaho, Indiana, Maine, Mississippi, North Dakota, Nebraska, and Tennessee.
To get started with a Lending Club debt consolidation loan, visit Lending Club’s website.
