If you are struggling to manage debt and make payments, a debt consolidation loan is a solution you can opt for. With debt consolidation, you have just one payment every month and you can catch up to your debt more flexibly.
The interest rate you pay on this loan is also lower than your credit card rates. But what should you do before applying for the loan? If you are looking to pay off your credit card debt through this loan, close your account first.
Financial advisors say that people most often pay off their credit card debt but do not close their accounts. They end up using their cards again, and accumulate more debt, which includes the reused cards and the consolidation loan.
It is also important that you create a budget – know how much you need to keep aside for loan payments and other expenses. Also make sure you check your credit reports. Before making you the offer, the lender will go through your credit report.
Be prepared to explain any negative mentions on your report, and spend some time to correct any errors in it. This can make a big difference in deciding whether your loan is approved or denied.
Collect all your bills and determine which ones you would like to include in your debt consolidation loan. Generally, auto loans and home mortgage payments are not included in these loans. Identify lenders that offer competitive rates, and take care not to apply to too many different lenders as this may adversely impact your credit.
If your application is denied, ask your lender for an explanation. You could also seek help by discussing other debt repayment options with a reliable credit counseling agency.
To learn more about debt consolidation, click here!