I have some credit card debt across 3 accounts. Currently they're all at 0 APR, but the promotional rates are set to end soon, and I don't want to open any more accounts. In this situation, I'm aware of only one option: debt consolidation. And I'm afraid my understanding of debt consolidation might be too simplistic:
- Secure a personal loan at lower APR than debt.
- Use said loan to pay off debt immediately.
Is that really all there is to it? I'm proficient with numbers, but I'm afraid there might be things "in the business" I'm not aware of—things perhaps only a professional would know.
Currently, I get mail from entities like "Lending Club," offering attractive rates that make it seem like a no-brainer to jump on board. Which is what makes me skeptical—why on Earth would anyone pay credit card rates when rates for personal loans seem drastically lower across the board? I mean, there must be people out there who are paying those ridiculous rates, right?—otherwise credit card rates couldn't be so high since they'd have to compete with personal loan rates. (These aren't my real questions—just explaining my reason for skepticism.)
Here are some example questions I have based on one of my mail loan offers:
- "Low fixed monthly payments with flexible terms." Are certain loans not "flexible" in some way that I should watch out for? What does "flexible" mean here—compared to what?
- "No prepayment penalties or hidden fees." That just means the earlier I pay the loan off, the more money I save in interest, right?(—unlike, say, most auto loans, where prepayment doesn't help you save.) But what other penalties might exist? What are some example hidden fees?
And here some questions I have in general:
I've never heard of Lending Club—I see it listed on Bankrate, and mentioned in this thread, but is there some other site through which I can check the reputation of these entities?
Are there kinds of loans other than a "Personal Loan?" (I don't know if that's an umbrella term for non-business loans, or a very specific thing.) Are there other options in general I should look into?
I'm afraid I appear to be asking too many questions, so let me summarize—in my mind, what I'm seeking is coherent: I'd like to know what I might be missing by accepting one of these loan offers and paying off my higher-interest debts on my own, without the aid of a professional, given that I do read the fine-print, but I lack the experience to compare various term- and fee-structures.
("Go ahead. There aren't that many hidden 'gotcha's," is a valid answer, if that's indeed the case.)
Thank you in advance to those with experience able to provide any advice.