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The 6 Steps That Can Help You Get The Debt Consolidation Loan You Need Right Now

Figuring out debt consolidation can be a little confusing at first. Like everything new and complicated about finance, debt consolidation takes some time to perfect. It is the process of combining your credit card debts, your unsecured loan payments and your bills into one. For some people, consolidation can take many trials and more than a couple of months. Ultimately, when you do succeed, you need to understand that it is only a means to an end. There are several things you need to do to ensure that the consolidation process is beneficial for you.
As per experts, there are six most important things you can do to ensure that debt consolidation works in your favor.

Run credit checks before applying for debt consolidation 

Three major credit reporting agencies offer free credit checks at least once in 12 months. It is crucial for people who are struggling to make their payments each month. As a result of unusual payment patterns, your credit record can suffer. Keeping an eye on your credit score will give you an understanding of your FICO score trends.

Many people state that checking their FICO scores from time to time helped their scores improve. It is quite contrary to the age-old belief that reviewing FICO score frequently harms the record. Over 70% people who check their scores once a month reported an improvement in their ratings. 

There is no downside to checking your credit score. Once you know how to work on it, you may even start qualifying for better loans at lower interest rates and lower APRs.

Analyze your payments that need debt consolidation

To understand your debts better, you have to make notes of their nitty-gritty details. Note down the total number of loans including the creditor details, and include their interest rates, APRs, total payment completed, pending amounts and total interest payable. It will give you an idea about which ones are the most notorious in your list. 

Usually, credit card debts and payday loans have significantly high interest. Make a list of these credit cards and unsecured loans that you believe require consolidation. Their interest rates can go up to 30%, and they demand instant attention.

Research your debt consolidation options

There are several ways you can consolidate your outstanding debts. To know the best options for you.
  • Taking out unsecured personal loans
  • Using secured loans like home equity loans
  • Using your 401(k) retirement funds and life insurance
  • Transferring balance to a 0% interest credit card
You can either do this with the help of your bank or regular financial institutions if you have at least a decent credit score. In case your credit score is weak, you can turn to online agencies for help. Online debt consolidation agencies have minimum credit score requirements, but their criteria are often much more comfortable to fulfill.

Check the reputation of the consolidation loan agencies online. Research into their histories and client reviews. You must find reliable lenders who can help you manage your finances. Find out about the extent of their services. Most credible agencies offer debt management plans and debt counseling in addition to debt consolidation loans.

Taking another step towards debt consolidation

Once you find out everything you need to know about the requirements and the process, you can apply for your consolidation loan. Most companies do not dillydally when it comes to responding to a potential customer. You will get an almost immediate response. If you have decent credit scores and multiple debts, you will likely get a "yes." That indicates the time to move to the next steps.

A "No" should not dampen your spirits. It is not the end of the world as we know it. You should keep trying other agencies. Several agencies allow people and business owners with poor credit scores to apply for debt consolidation loans. However, bankrupt people cannot qualify for any debt consolidation services.

If a consolidation agency rejects you, find out the reasons for the rejection. Seek the counsel of a company that provides debt management plan or DMP. Debt counseling often helps debtors to understand their finances and manage their payments better.

It is time for debt consolidation

Once you get a "yes" as an answer, it is time to move on to a new loan. The new line of credit you open should help you pay off your small and medium debts with higher interest rates. Start by paying off the high-interest loans and balances. Once payment of multiple loans is complete, you can focus on the payoff of the single new line of credit from the debt consolidation agency.

The new loan, although much higher in amount, comes with amicable interest rates and lower APR. It keeps the monthly payment within a manageable range.

Never pay the minimum amount to your debt consolidation loan company

After consolidating your debts, do not end up paying the minimum amount to your debt consolidation loan company. Paying the bare minimum can stretch your repayment period to 6 or even seven years from 3 or 5. Initially, you will be paying lower monthly installments at low-interest rates. However, you will end up paying a lot more overall by the end of the repayment term.

Always try to add a little extra to your monthly installments. That will help you pay off your loans faster. Avoid using the credit lines you pay off. Check your expenses, and this will help you heal your credit score, resuscitate your finances and keep yourself in the fiscal safe-zone for the coming few years.

While opting for a debt consolidation plan, try to go for debt counseling and debt management as well. These are allied services that many consolidation agencies offer. Debt counseling and credit counseling experts will explain the factors that currently affect your credit score, credit record, bank history and financial profile. It can help you prioritize your payments and expenses. Debt counseling sessions often help individuals to prioritize their current loans better and optimize the expenditure of the credit. 
The 6 Steps That Can Help You Get The Debt Consolidation Loan You Need Right Now The 6 Steps That Can Help You Get The Debt Consolidation Loan You Need Right Now Reviewed by Lokesh kumar on 12:32 PM Rating: 5