Being stuck between several debts and remembering when to pay can be confusing and frustrating. It would be so easy to gather up all the loans you owe to different creditors and pay them all as one every month. Wouldn’t it? So to make your debt repayments less confusing, you have the option of getting a debt consolidation loan.
Debt consolidation loans are no different from personal loans, but with exceptions. A debt consolidation loan helps you pay off all the other debts and then pay a single debt that is a debt consolidation loan. We will look at debt consolidation loans in debt later but first, since you are here, let us look at how to apply for a debt consolidation loan and the elements to take care of while applying for one.
How to avail of a Debt Consolidation Loan?
You need to go through a few steps to get a debt consolidation loan. With each step comes some or the other precaution you must take. Now let us look at the process to avail a debt consolidation loan.
Though not a proper step in getting a debt consolidation loan, it is recommended you first try to get some free advice from people who are authorised in this field or people who have several experiences with debt consolidation loans.
You can always call National Debtline to enquire about debt consolidation loans and if it is appropriate for you to take one.
Credit details
The first and foremost thing you need to ensure is that your credit report is up to date. All the details in your credit report must be the latest and authentic. Multiple websites can check your credit report, and various agencies can also help you do so.
Calculate and make a list
The second thing you need to do is list all the debts you owe and how much you owe. This will help you determine how much loan you will need. Then calculate all your monthly expenses, excluding the loans you currently owe, so that you will have an idea of how much you can pay monthly to a debt consolidation loan creditor.
Compare and choose
As you do with everything else, do the same here; compare different debt consolidation loans offered by various websites and banks and select the one that suits you the best.
As said before, you must calculate how much you can afford to pay each month and for how long it will help you determine which debt consolidation to take.
While comparing debt consolidation loans, you must keep three things in mind; first, what are the charges for the debt known as Annual Percentage Rate or APR, second for how long you have to pay the instalments to fully pay the debt and the third how much you will be asked to pay every month. This will help you choose the best debt consolidation loan for you.
Apply for a debt consolidation loan
The next and the most crucial step in this process is to apply for a debt consolidation loan. Now you will understand why it is so important to compare the debt consolidation loan deals in the market.
You cannot fill out many applications for debt because filling multiple debt applications so frequently can affect your credit score, which will affect you while you take any other loan in the future.
Once you’re ready, get all your required checked documents and apply for a loan in a bank or on online websites. Please read all the documents provided by them carefully so that you won’t end up paying extra charges or get stuck in the process.
Paying off loans
Once you get approved and receive your money, the first thing you are supposed to do is use that money to pay off all the other loans.
Make this repayment as soon as possible as if you take a long time to do so, the interest rate will keep increasing, and you might get tempted to spend the money on other things.
Now that you have got a debt consolidation loan and have paid off all the older loans, you may now pay your debt consolidation loan every month without fail, as failing to pay even one instalment can affect your credit score.
If you are having a problem with paying off your monthly instalments and wish to lower the number of your monthly instalments, you can speak to your creditor and extend the repayment term.
It is better not to extend your loan repayment term as if you do so, you might have to pay less every month, but you will end up paying extra interest money, and the creditor might also charge additional fees.
Conclusion
A debt consolidation loan is a loan that you can use to pay off all the other debts if you have several of them. Getting a debt consolidation makes it easy because you will not have to worry about the different interest rates, dates for when to pay, and the amount to pay as the debt consolidation loan will pay off all the other loans, and you will only have to pay one loan that is the debt consolidation loan.
To apply for a debt consolidation loan, you must first check your credit report and ensure it is authentic and up to date. Next, you must make a list of all the debts you currently owe to different creditors and how much you owe to them.
Calculate all your monthly expenses except the current loan repayments so that you will be able to estimate how much you can afford to pay monthly in a debt consolidation loan. Now compare all the debt consolidation loans available in the market and choose the best for you.
Do not fill out many applications as this will affect your credit score. Finally, apply for a debt consolidation loan, pay off all your loans, and only pay your debt consolidation loan every month. Now you are free from all the monthly hassle.
