Getting a consolidation loan can be helpful, especially for individuals with high-interest debts like credit cards. A debt consolidation loan can help you reduce your monthly payments, save money, or get out of debt sooner. The following is the process you must undertake to get approved for this loan.
Check Your Credit Score
A good credit score is usually necessary for getting a debt consolidation loan that serves your needs. According to FICO, a good credit score is 670 to 739. People with higher credit scores are more likely to qualify for a loan. Typically, the annual percentage rates of consolidation loans should be lower than your debts’ total interest rates. This can help you get from your debts faster due to the reduced general cost. If your credit score is 300 to 629, you can take time to build it and qualify for a lower-rate loan by catching up on your late payments, repaying smaller debts, and checking for credit report errors, according to Symple Lending.
Outline your Debts and Payments
The next step is usually listing and adding the total amount due of the debts you intend to consolidate, including payday loans, store credit cards, credit cards, and other debts with high interest. Determine the monthly amount payable towards your debts and make any adjustments where applicable to continue paying your debts. Your new loan’s monthly payment should be within your budget and have a lower rate.
Consider Different Lenders
Different lenders, including credit unions, online lenders, and banks, offer different terms and rates for debt consolidation loans. Select the one that suits your needs best. Consider choosing a lender providing direct payments to creditors to simplify the consolidation process. These lenders usually submit your loan proceeds to your creditors freely when the loan closes. Features include free financial education or a rate discount for autopay setting. You can also consider seeking financial help from a knowledgeable associate at Symple Lending.
Apply for Your Loan
Applying for a loan after evaluating different lenders may require you to present extra documents. Although lenders inform their clients what to provide, essential documents you should have include past tax returns, your recent pay stub, personal IDs like a driver’s license, and bank statements. The process of reviewing and approving an application usually takes a few minutes. However, it can take longer if you need extra documents. You should pay attention to emails or phones from your lender as you wait for your approval. This can help you get feedback sooner.
Repay Your Loan
If approved for the loan, consider enrolling in autopay to avoid late payments since they can damage your credit score. Although some debts, such as medical bills, may be inevitable, consider spending less and saving more to avoid many debts. This can help you develop financial discipline and avoid unnecessary debts as you repay this loan.
Seeking financial help can help you settle an emergency, attend to your basic needs, or even develop your business. However, it is crucial to evaluate the terms and conditions of the loan for it to serve you according to your needs.