A Guide to Getting a Debt Consolidation Loan
If you're getting in over your head with credit, you might consider getting a debt consolidation loan.
This loan is designed to pay off at least a portion if not all of your outstanding debts, allowing you to have either reduced payments or in some cases only the single payment of the loan itself to repay.
If you're looking for a debt consolidation loan, there are several factors that you might want to consider to find the loan that's right for you.
Different banks and lenders may offer different terms for a debt consolidation loan, and you want to make sure that you get the best deal for the money that you can.
Some of the factors that can affect your chances are your credit rating, the value and type of collateral that you're putting up to secure the loan, and of course the total amount that you need to borrow.
Let's look at each of these factors individually and how to maximize your deal on a debt consolidation loan.
Your credit rating is the score by which lenders and potential creditors determine how much of a risk you are to extend credit to.
The lower your credit rating score, the more of a credit risk you are; the higher the score, the less of a risk.
Obviously, if you're trying to get a debt consolidation loan then you're probably closer to the low end of the scale, but trying to get help before you get too low is a good way to lessen the negative impact of your credit rating on the loan interest you'll have to pay.
When things begin to get out of control and you find yourself in debt beyond your means to pay it back in a reasonable amount of time, that's the time to try to get a help.
If you wait, your credit rating may drop lower and you'll have to pay more in the end.
In most cases, you'll have to put up some type of collateral in order to secure your debt consolidation loan.
This can allow you to get a larger loan while paying lower interest rates, since the lender has some form of property that they can possess and sell if you fail to repay what you've borrowed.
The most common forms of collateral are automotive titles and real estate deeds, and both are very effective.
After all, they're larger-value items, and they give you a good incentive to repay your debt.
Just make sure that you have insurance; if not, the lender may either require it or drop the value of the collateral considerably.
The amount that you want to borrow is obviously a big consideration in getting a debt consolidation loan.
Borrow the lowest amount that you can while still taking care of all of your debts (or at least the largest debts).
You also need to make sure that the amount you borrow is much lower than the value of your collateral; this usually entitles you to a much lower interest rate.
The author, John Mussi, is the founder of Direct Online Loans.