Harrison Funding and Johnson Funding may be running a debt consolidation scam according to multiple personal finance sites. Harrison Funding has begun flooding the market with personal loan, debt consolidation and credit card relief offers in the mail with the website My Johnson Funding. The problem is that the terms and conditions are at the very least confusing, and possibly even suspect.
The interest rates are so low that you would have to have near-perfect credit to be approved for one of their offers. Best 2020 Reviews, the personal finance review site, has been following Harrison Funding, Johnson Funding, Taft Financial, Georgetown Funding, Credit 9 and others.
Living can be quite expensive; there are no doubts about that. To afford most of life’s big expenses, we have to take multiple forms of loans and make ends meet. These accumulate in the form of debt and can be quite challenging to pay off. Moreover, each loan can have separate bills coming in every month with high interest rates, and this just makes things more stressful.
If you are in such a situation, debt consolidation can solve your problems. It is an easy way to pay off all these individual loans and manage your money better.
Here is how it works.
How Debt Consolidation Works
Debt consolidation requires you to take out a loan, generally with a low interest rate and a payback term that fits you. The loan is big enough that you can pay off all the individual debts you owe, including personal loans, student debt, credit card debt, and store cards.
Are you still unsure of whether credit card consolidation would be the smart choice for you? This blog covers everything you need to know to determine whether debt consolidation could help you gain better control of your finances.
We’ll go over the basics, figure out the mystery behind credit scores, and even give some secret tips to get the best interest rates.
What Should My Credit Score Be for a Debt Consolidation Loan?
Firstly, we need to understand what a credit score is and how it is calculated. Contrary to popular belief, you won’t have a particular credit score, as different providers work it out differently using their methodologies. The most commonly followed ones are:
- Experian
- Equifax
- TransUnion
These organizations gather all the relevant data and information about you and then sell it to potential lenders. One of the most critical parts of the data sold is your credit score, calculated by the agency after considering the following factors.
- What is your track record of repaying the loans on time?
- Have you missed any payments or CCJs?
- What is the total amount of credit you need to pay? (This will include any credit cards and unused overdrafts).
- What is the amount of available credit currently in use? (this excludes any existing credit card debt that you have).
- Is the debtor on the electoral roll?
How do Lenders Calculate the Credit Score?
As we mentioned above, different lenders have different ways of calculating your final credit score. For example, Experian has a score range between 0 and 999, while Equifax caps it at 700. Most creditors use these credit ratings as just one of the data points when deciding whether to give you a loan. So, good credit scores are helpful, but other things also matter. Lenders will also go over your monthly income and the amount you wish to loan.
Some creditors don’t consider credit scores at all. They opt for Open Banking data instead to make profitable loan decisions.
Since you can find a wide variety of lenders willing to offer debt consolidation plans, there will be one for the perfect loan for you. Different creditors have different loaning criteria; hence, there is no ‘minimum score’ required.
However, you should keep in mind that debtors with particularly low scores will generally find it more difficult to get a loan. Debtors will mostly be unwilling to trust them with debt consolidation loans. Even if someone agrees, chances are they will get the loan at a higher interest rate.
How Much Money Should You Borrow?
Once you’ve decided that debt consolidation is the right money management decision for you, the next step is to determine how much to borrow. Generally, you just need to do a simple calculation to add up the total values of all your outstanding debts.
But, remember that some lenders have extra charges for paying off loans early. They also offer rebates and other elements, all of which need to be included in your calculations before deciding an amount.
After doing so, you will have the exact amount you need to consolidate all your debt successfully.
What is an Appropriate Time for Payout?
Now that you know how much to borrow, you need to decide an appropriate period to return the loan. Here are your options:
- Repay the loan quicker with higher repayments each month, but saving money in the long run.
- Repay the loan over a longer period of time, with lower monthly payments. This will be more expensive in the long run.
Let’s assume, you have a loan worth $5,000 with an interest rate of 10% per year.
Paying off the loan in a year will require you to make monthly payments of $458.33. Hence, the total amount repaid will be $5,500.
If you repay over five years instead, you will make monthly repayments of just $125. However, the total amount you repay will reach up to $7,500.
How to Apply for Debt Consolidation?
The application process for debt consolidation is relatively straightforward. You can do it yourself (without the services of a credit broker) and don’t need financial advice beforehand.
When you apply for an unsecured consolidation loan, the lender will provide you a representative example. They will question what you plan to do with the loan and gather all necessary information.
The Final Step – Getting Your Loan
Quite a few debtors offer loan calculators to help you determine the exact loan amount you need. This tool will also help you decide on your monthly repayments, the total amount you’ll repay, and a personalized quote.
Since debt consolidation plans come with a fixed interest rate, you won’t need to worry about any changes to your repayments. It will also allow you better control over your money and make accurate predictions of the repayments.
Lastly, debt consolidation creditors generally offer multiple options for how you make your repayments. Direct debit is often the easiest and simplest practice, though.
We hope you’re now equipped with everything you need to know before taking out a debt consolidation loan.
Good luck!