Because Bank of America is one of the largest consumer credit issuers in the United States, it tends to have its own way of doing things when it comes to debt consolidation. Remember, the bank doesn’t want you to default on your loans any more than you do. If you’re holding on to a large credit balance with the company and find yourself struggling just to make your monthly minimum payments, you can expect several things to happen.
As a first step, the company usually approaches its delinquent customers with an offer for a debt consolidation loan, which it frames as a convenient way to bundle credit balances from a variety of other issuers together with Bank of America debts. Such loans can appear attractive at first, but they are rife with drawbacks.
Consolidating Bank of America Credit Card Debt
If you opt for a Bank of America debt consolidation loan, you’ll usually receive just enough money up front to allow you to pay off your principal balances. The momentary elation you’ll feel upon getting rid of your old Bank of America balances will quickly fade, however, as you look over the terms of your loan.
Although the average introductory rate on a B of A debt consolidation loan is just 9.49 percent, these teaser rates can quickly balloon after a honeymoon period of as little as six months. If you choose the debt consolidation loan route and your credit is already poor, which is a decent possibility if you have more than $10,000 in outstanding credit card debt, you’ll likely end up with an annual interest rate of closer to 25 percent. On even a $10,000 balance, the difference between these two rates can be massive–over $1,500, to be exact.
In addition to the crushing rates of interest you’ll face with a Bank of America debt consolidation loan, you’ll find that these loans are of limited benefit if you suffer from very high levels of debt. The company begins offering these loans to clients with outstanding balances of more than $10,000 but cut off support at $25,000, meaning that the company will not offer financial assistance to customers looking to pay off debt loads beyond that level.
A Loan Is Not Your Best Way To Pay Off Bank of America Debts
Once you’ve wisely decided that a loan is not the best solution to your debt problem, you’ll have several options for tackling your outstanding Bank of America balance. If your account remains in good standing, your first step should be to call the company directly and explain the situation to them in great detail. Although it’s plain from the fact that you’re barely making your minimum payments and running a monthly balance that exceeds your stated income, they can’t help you if you don’t approach them first.
More so than other major creditors, Bank of America is known for its willingness to work with its clients. The company’s size and reach allows it to offer a “financial hardship program” designed to help individuals and families struggling with job loss, medical bills, foreclosure, and other issues.
It’s worth inquiring about this program even if you’re merely overextended, in which case the company can offer you a temporary interest rate reduction, a suspension or reduction in your minimum monthly payment, or a moratorium on penalty interest should you miss a payment one month.
Bank of America Debt Relief Plans
Bank of America also works with credit counseling agencies and debt consolidation professionals to help its customers negotiate settlements and pay off their debts in a timely fashion. If you’re unable to negotiate a settlement directly with the company directly over the phone, this will likely be the next step in the process.
If you’re struggling to make your minimum payment each month, the interest rate on your outstanding balances is probably quite high. Although every case is different, past Bank of America debt consolidation clients have shaved an average of nine percentage points off of their old rate of interest. If you’ve been paying penalty interest rates of 25 percent or more, you may be able to save even more than this. Remember, reducing your interest rate by even a single percentage point will save you $100 per year.
Reducing the average interest rate on your outstanding balances can be helpful, but oftentimes it’s not enough. Cutting the annual rate of interest on a balance of $20,000 from 20 percent to 10 percent will save $2,000 per year, a not-insignificant sum.
Bank of America clients who negotiate an outright settlement on their outstanding debts, however, can save many times that. If you see your settlement process through to completion, you can expect to knock over 50 percent, on average, off of your debt. Fill out the free form or call today to connect with a debt settlement professional and get the most out of your Bank of America debt consolidation!
Taking a Closer Look at Bank of America’s Debt Consolidation Loans
Bank of America has a wide range of services and financial products for its customers, including numerous types of loans. Where debt consolidation loans are concerned, the institution offers secured and unsecured varieties. Unsecured loans are typically offered to those with higher credit scores and usually come with higher interest rates because a bit more risk is involved for the bank itself. Secured varieties may be available for those with lower credit scores as the potential risks are mitigated by collateral.
Qualifying for a Bank of America Loan
As is the case with most lenders of the modern era, money doesn’t exactly flow freely from Bank of America’s debt consolidation loan vault. In most cases, debt consolidation loans as well as the bank’s other borrowing options are reserved for those with credit scores falling above the 650 mark. Applicants should also have an acceptable debt-to-income ratio in order to be approved. Though the bank is a bit elusive about its specific requirements in this regard, most institutions consider around 40 percent to be adequate.
Being eligible for a Bank of America debt consolidation loan also entails having an active bank account with little to no negative activity, such as overdrafts or insufficient funds incidents. Having steady income and a reasonably strong employment history is generally required as well.
The Application Process
Bank of America doesn’t offer an online option at this point though this may change in the near future. Applicants may request loans over the phone or in person at one of the institution’s more than 5,000 branches across the nation. Applications ask for personal, contact and bank account information as well as details regarding employment, income and expenses among other aspects. In addition to completed applications, potential borrowers must submit:
- Proof of residence
- Proof of employment
- Recent pay stubs, tax documents or other proofs of income
Applicants may be required to provide additional documentation depending on certain factors. Loan officers perform credit checks, debt-to-income ratio calculations, income verifications and other analyses before determining eligibility.
Bank of America’s screening process takes a bit longer than other lenders for some borrowers but not to an extreme extent. While the bank doesn’t provide an online application option, help is available with the application process via the BoA website. Loan seekers can also check the status of their applications online.
Generally speaking, Bank of America’s unsecured debt consolidation loans are available in amounts of up to $50,000. Some other lenders offer more substantial loans of this type, so those who need funds in excess of this amount may need to explore other alternatives. Interest rates start in the neighborhood of 9 percent but range upwards of 25 percent. These figures vary based on market fluctuations.
Those with lower credit scores can expect higher interest rates. On last report, BoA’s loans were only available in variable-rate form, meaning the applicable interest rate at the time the loan is taken out could easily change after a couple months. For those starting out on the higher end of the spectrum, this may lead to certain hardships over the course of the loan term.
Many other lenders offer fixed-rate loans, making exact monthly payment amounts more predictable. At the same time, a number of institutions start off their interest rates at a somewhat lower point than BoA. Wells Fargo, for example, offers rates as low as 7.24 percent for borrowers with good credit histories. LendingTree’s rates begin at 4 percent.
Having said that, Wells Fargo’s higher-end interest rates are comparable to those of Bank of America whereas LendingTree could go as high as 40 percent. As with any lender, rates are determined by credit score, banking history and a wide range of other factors.
When it Comes to the Payout…
With debt consolidation loans through Bank of America, borrowers have a couple different options in regard to their funds. They may opt to receive a lump sum to distribute as they see fit. While this provides the freedom to chose which debts are paid off and which remain in play, it could also leave the door wide open for certain spending temptations. On the other hand, borrowers can choose to have BoA send payments directly to their creditors.
What Are the Benefits and Drawbacks of BoA Debt Consolidation Loans?
Being able to bundle several high-interest unsecured debts into a single payout holds plenty of benefits in its own right. Bank of America does offer to pay creditors directly, taking much of the burden of allocation off its borrowers’ shoulders. Assistance and guidance are also readily available online, by phone and in person for those who apply and qualify for loans through this institution.
While BoA’s starting interest rates are comparatively high, they top out well below certain other lenders. In order to receive the lowest available rates, borrowers must have near-perfect credit. To be granted a debt consolidation loan at all through this institution, credit scores must at least fall into the “fair” range. Though other aspects will be taken into consideration when determining eligibility, credit standing does factor into the equation.
At present, only variable-rate debt consolidation loans are available. This, combined with the already higher-than-average interest rates offered by the bank, could make monthly payments more of a burden than many borrowers are prepared for. Though fixed-rate loans come with greater certainty and stability, those aren’t yet offered through BoA for debt consolidation purposes.
One common issue revolves around debt consolidation loans whether from Bank of America or other sources. Borrowers often jump into such an agreement with a false sense of hope and security. In reality, many find themselves facing higher interest rates and monthly payments than the sum of the debts they combined via the loan. For this reason, these aren’t always the best option.
What Other Options Are Available?
Some people find a single exorbitant monthly payment is the only hurdle preventing them from making ends meet. Should that one payment be brought down to a more manageable level, their entire budget would fall into place. For those, many creditors, credit card issuers included, extend hardship programs to their debtors. Some offer lower interest rates whereas others reduce monthly payments; either way, this could be the relief many people need to restore balance to their finances. This is only the tip of the iceberg.
Debt management essentially takes individual creditors’ hardship plans to another level. In this type of plan, specialists speak with creditors on clients’ behalves to reduce their monthly payments and generate a certain degree of financial relief. It offers people a way to pay off their unsecured debts rather than default on them.
Since this option involves paying outstanding balances in full over time, those who take advantage of it are able to prevent further damage to their credit scores in many cases. Monthly bills are paid without the use of an outside loan, so it doesn’t entail replacing existing debts with yet another expense.
In the case of debt settlement, a financial mediator negotiates with a client’s creditors in an effort to convince them to accept less payment than they’re actually owed. Debtors then funnel money into an account dedicated to their settlement efforts. These funds are allocated to creditors who agree to such a plan.
While reduced overall balances and lower monthly payments have effectively helped a number of people get out of debt in an average span of two or three years, this option does have a few pitfalls. Creditors aren’t required to agree to settle for less, and many choose to pursue other courses of action. People often have to let their monthly payments fall behind before seeking a debt settlement plan, so their credit scores suffer as a result. Tax repercussions and additional fees may also apply.
Bank of America’s Take on Other Debt Relief Options
Bank of America extends a number of solutions to those facing significant debt. While the institution’s debt consolidation loans may be the best answer for some, they’re only one of many options. Though some may seem a bit counterproductive at first glance, they do offer certain advantages for those who are qualified.
Home Equity Lines of Credit
With a home equity line of credit, or HELOC, those with a mortgage through BoA may borrow money against the equity they’ve built up in their homes. These funds can be spent in a number of ways and even in increments rather than a single lump amount, but many chose to use them for consolidating unsecured debts.
Because of the spending freedom generated by HELOCs, their interest rates are typically calculated on a daily basis instead of monthly. This leaves borrowers vulnerable to fluctuating rates; of course, standard debt consolidation loans from BoA have the same impact. Furthermore, when turning to a HELOC, the home acts as collateral. If the loan can’t be repaid once the time comes, the borrower stands to lose the home.
No doubt, the thought of acquiring a credit card to consolidate debt, possibly from other credit cards, leaves some raising their brows. For Bank of America customers backed by solid banking histories and credit scores, though, this may well be a viable solution.
BoA offers credit cards with zero percent APR to qualified accountholders. These may be used to pay off unsecured loans; at the same time, customers can transfer the balances of credit cards with higher interest rates to their interest-free BoA cards at no extra charge. Annual fees are also waived.
Bear in mind, these are introductory offers. Zero percent APR only applies for the first 15 billing cycles after opening a credit card account. From there, the rate can jump to between 14 and 25 percent depending on certain factors. Sixty days after opening the account, balance transfer fees of 3 percent apply.
Debt Management through BoA
Debt management mirrors debt consolidation in a number of ways with the exception of taking out a loan for the latter. Another difference is the absence of a professional negotiator when turning to a debt consolidation loan.
Bank of America offers its own form of debt management, often provided in conjunction with credit counseling services. Debt counselors and management specialists with BoA analyze customers’ income, expenses and other circumstances before devising a plan for debt relief. Once they’ve determined how much the client can comfortably afford to pay creditors each month, the institution’s financial envoys negotiate with creditors for better interest rates and lower payments. Clients then send funds to a BoA account from which creditors are paid.
In a Nutshell
Numerous options are available for those who want to reduce their monthly expenses with debt consolidation being among the most popular. Bank of America offers debt consolidation loans to qualified borrowers, but its interest rates and conditions aren’t quite as manageable as those of certain other lenders. BoA’s eligibility requirements are also much less lenient than some other institutions.
As is always the case, it’s important to carefully sort through the terms of any agreement to avoid unpleasant surprises. Far too many people have jumped at the chance of rolling all their debts into a single monthly payment only to find they’re losing out in the long run. Comparing current monthly payments, interest rates and overall balances against those of a debt consolidation loan is the key to success with this type of debt relief.
For those whose needs aren’t met by BoA’s loans, or debt consolidation in general for that matter, the institution extends an array of other alternatives. With the right credit scores and histories, customers may be able to take advantage of zero-interest credit cards for a time; of course, those rates do eventually go up. Customers who currently have home loans through BoA may also have the option of a HELOC for debt consolidation or other purposes. Credit counseling and debt management plans are likewise available via Bank of America.
While BoA furnishes a long list of solutions for accountholders and other consumers, they’re just not right for everyone. Some would certainly be best served by other lenders and alternative debt relief opportunities.