When you are in debt, things could become pretty stressful and dicey. If you are burdened with massive debts, you would be making just the minimum monthly payments but by doing so, you are not gaining financially in any way. The best part is that you still have certain options that may include debt consolidation that could assist you in regaining your financial freedom.
How Would a Debt Consolidation Loan Help for Paying off Debt?
A debt consolidation loan would be helpful in paying off your debts because a lender would be loaning you the money for paying off all your existing debt. For instance, if you are having 3 credit cards and suppose you owe a total of say $20,000; if you request your lender for a debt consolidation loan provided you are eligible for it, they would be lending you the required $20,000. Your existing credit card outstanding balances would be paid off by them and you could close all those accounts. You would now be required to make just a single monthly payment as per schedule to your lender as a repayment for the $20,000 borrowed by you.
Debt consolidation is supposed to be a great option as you could merge all your outstanding debts under one relatively more manageable loan. Careful comparison and meticulous background check of lenders would help you identify the best loan for consolidating your debts.
You must have a realistic budget for your household so that you could stick to it. If you fail to follow a realistic budget, you would be heading towards trouble again. After making a few loan repayments, you would be having issues with making the scheduled monthly payments. Once again you would start defaulting. You would be applying again for brand new credit cards. In such a situation, it is likely that you would soon accumulate more debts, instead of paying off the current debts effectively with a debt consolidation loan.
Are you thinking about ways to qualify for debt consolidation? Loan companies actually concentrate on four crucial factors while evaluating your loan application that would be determining whether you would be eligible for debt consolidation or not. Once you have successfully submitted your loan application, the loan officer would be reviewing your application and thoroughly examine your information and check slightest details related to your credit history.
In this context, you may know that certain loan companies would be using an automated scoring system for ranking your credit while there are still other debt consolidation companies that would be using the services of credit analysts for determining if you are eligible for the debt consolidation loan.
How Could You Be Eligible for a Debt Consolidation Loan?
Getting a debt consolidation loan is actually a qualification process. Different debt consolidation companies have different requirements and rules to follow. However, there are certain things that are commonly required to qualify for a debt consolidation loan.
- A good credit score that would be meeting the minimum requirement of the lender implying your credit report must not have big negative notes and there should not be too many late or delayed repayments.
- You are earning a decent income that meets the minimum requirement of the lender.
- You do not have very high total monthly debt payments.
- You are capable of offering some solid security for your debt consolidation loan.
Now let us discuss the basic four requirements for getting a debt consolidation loan in detail.
Earnings or Income: The first thing that the creditor would like to know about you is do you have the capability of paying back your loan? They would certainly ask for a relevant paystub as a sufficient proof of your earnings, just to make sure that your job is quite steady and definitely a stable one. Also, you are earning enough to repay the debts.
Payment Record: They would like to know more about your history when you are paying back all the creditors. You need to make all the payments on time as a delayed payment would mean that your interest rates would go up.
Overall Consistency: It is important to demonstrate that you are financially quite stable and there is overall steadiness of income. The loan officer would be asking you if you were living in this vicinity for over a couple of years and might even want to know how long you are working with your current employer.
Collateral: Home equity loan firms are quite hesitant to give huge amounts of money to individuals without collateral. Most of the creditors would be looking for a decent home equity before approving a debt consolidation loan.
You could still be eligible for debt consolidation even if you do not own a house. However, with no collateral, you could grab relatively a much smaller loan amount. Just for your idea, you could consolidate debt worth $50,000 provided you have home equity worth $60,000.
Having your own home is certainly of crucial importance, as far as, debt consolidation eligibility is concerned. Many creditors would be slackening their standards if you seem to be a homeowner. They would certainly feel secure at the thought that if you fail to make the payment, the loan firm would always be having the right to foreclose on your home, find a buyer, and sell it. They could then use all the proceeds for paying off your loan.
Some people do not understand what exactly a debt consolidation loan is all about and they fail to understand the implications of debt consolidation. Before applying for a debt consolidation loan, you must determine the best way of consolidating credit card debt that is most appropriate for your specific situation. You could get in touch with a reputed debt consolidation company and seek their professional advice or you could speak to a qualified and expert credit counselor. No matter what situation you are in, you need to do ample research and identify a reliable and renowned debt consolidation company even before submitting your debt consolidation application. Every lending agency would be having their criterion for approval. So, it is best to understand what you would be requiring to qualify for debt consolidation. Follow the aforementioned suggestions to get rid of the debt issue forever.