If you need to shed a bunch of high-interest debt, you may be mulling over the taking of a consolidation loan. These allow you to combine multiple debts into a single lower-interest loan with one fixed monthly payment. Here are some steps you can take to raise your chances of getting your debt consolidation loan application approved.
Decide What Kind Of Loan
The two primary types of personal loans are secured and unsecured. The former requires you to put up collateral such as your house or car to ensure that your lender is paid should you default.
Secured loans tend to have less-rigid requirements, and you may be able to get a lower interest rate than what you’re paying on existing credit card debt. You could also get a larger loan than you thought you could. This strategy is fraught, however, since you are risking your property.
On the other hand, no assets are attached to unsecured loans, which rely upon your credit score and ability to repay. You’ll need better credit here than for secured loans, and you could wind up with a higher interest rate.
Figure Out How many loans You Need
Before you complete a debt consolidation loan application, you need to determine how much to borrow. Add up all the existing debt that you wish to consolidate. This will help you calculate how much you need to avoid requesting an unnecessarily high amount.
You also need to know what kind of shape your credit’s in. That means you should check your credit report as well as your credit score. Scour your file for inaccuracies that could hamper your chances for approval. Dispute errors to have them removed.
If you need a loan right away, you may not be able to wait for improved credit. Still, it’s good to know where your credit profile stands to inform your shopping.
Track Down The Right Lender
Not all financial institutions are the same. Check out banks, credit unions, and online lenders to learn where your best chances are. Credit unions tend to be more member-oriented and have requirements that are looser than major banks. Still, if you have a relatively long-standing relationship with a bank, you should try there as well. Online lenders are another possibility, and you’ll learn what each company offers and requires by going to their websites.
Resist the temptation to jump at the first offer and be sure to read all the fine print on any applications you’re considering. Be sure you’re aware of all terms and interest rates.
Put Together A Checklist
Now that you’re ready to go ahead with the application, create a list of all the documents required. You may need time to pull everything together so make sure you allow yourself that space. Incomplete applications can spoil your chances immediately, so it’s vital that you have everything together.
Keep in mind debt consolidation works best if you end up paying less in interest than you pay now on current debt. Depending on the rates you can get and the length of the loan, you could end up paying more for a consolidation loan over time, even if monthly payments are lower.
Be certain you are aware of the entire cost of the loan, as compared to the overall cost of the debts you have now.
So. now that you have information about getting your debt consolidation loan application approved, you can move forward with confidence and make the best financial move for your situation.