What Is the Average Fee for Debt Consolidation in 2024? (2024)

FAQs

How much does debt consolidation charge? ›

Expect to pay a balance transfer fee of 3% to 5% of the amount consolidated. If you're interested in a debt consolidation loan, use the sliders below to see how changing the interest rate or term affects how much interest you will pay.

Debt settlement companies charge a fee, generally 15-25% of the debt the company is settling. The American Fair Credit Council found that consumers enrolled in debt settlement ended up paying about 50% of what they initially owed on their debt, but they also paid fees that cut into their savings.

The average annual percentage rate (APR) on a debt consolidation loan is about 22.59%. The debt consolidation loan rate that's quoted may vary depending on the unique credit background of the borrower and the lending institution they're dealing with.

National Debt Relief's settlement fee is 25% of the total enrolled debt, though some states cap fees as low as 15%. Here's how the settlement fee works: If you enroll in debt settlement with $10,000 in credit card debt, and you're able to settle for $5,000, you'll pay a settlement fee of $2,500 (25% of $10,000).

You can afford to repay the loan: A debt consolidation loan will only benefit you if you can afford to repay it. You'll risk getting into a deeper debt cycle if you're not 100 percent sure you'll be able to afford the monthly payment down the road.

The amount you settle for could depend on your financial situation and the age of the debt. Also, policies vary among debt collection agencies. While one agency may accept 20% of the original amount owed, another may insist you pay at least 80% of the debt.

There aren't any free government debt relief programs for credit card or personal loan debt other than bankruptcy. Many types of government debt relief exist in the form of grants and low-interest loans for specific purposes.

Generally, the fee falls between 20%-40%, influenced by several factors: Age: Older debts, being trickier to collect, tend to incur higher fees. Balance: Small-balance accounts often attract a higher fee due to the relatively lower profit margins for the agency.

Future payments

Payments at least 30 days late on your new consolidated loan can sink your score. However, if consolidation helps you pay on time, your credit score will likely improve over time.

Is it hard to get approved for debt consolidation? ›

The short answer is: It can be, especially when it comes to traditional borrowing methods. While most banks and credit unions offer debt consolidation loans, the approval criteria can be stringent.

Every lender sets its own guidelines when it comes to minimum credit score requirements for debt consolidation loans. However, it's likely lenders will require a minimum score between 580 and 680.

It has been around since 2009 and has helped over 600,000 individuals reduce their debt. It also has an A+ rating from the BBB (Better Business Bureau).

Debt settlement companies often charge fees based on a percentage of the total debt enrolled in the program. While debt settlement can potentially help you save a significant amount of money, the associated costs should not be overlooked.

The average fee for debt consolidation is about 4% if you choose to get a debt consolidation loan and 3.12% if you get a balance transfer credit card. Along with these fees, you will need to consider the APR on your new loan or credit card when deciding whether debt consolidation is worth it.

Consolidating debts may temporarily reduce your credit score, but your score will improve over time as long as you make payments on schedule. You can minimize the impact on your credit through strategies like keeping credit lines open and avoiding new debts.

It will take 47 months to pay off $50,000 with payments of $1,500 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.

In addition, some lenders charge a sign-up, or origination, fee. However, there are several no-fee options with varying interest rates depending on your credit score. You should opt for a no-fee personal loan whenever possible. Debt consolidation loans are great if you have multiple credit card balances.