Tips for Taking Out a Debt Consolidation Loan
Debts can build quickly or slowly, but once they reach a tipping point, most debtors search for immediate relief. If you fall into that category of people who amassed a lot of credit card debt and other loans, you might turn to debt consolidation to solve the problem. The experts at Symple Lending have a few tips for successfully nabbing a consolidation loan and a lower interest rate on that loan.
Start with Your Credit Score
Before applying for any loan, check your credit score and credit history. Financial lenders decide whether to extend a loan based on a person’s credit score. They also use this number to determine the loan’s interest rate. The three credit bureaus track a person’s payments to their creditors and create an objective historical report that includes every payment. A late payment or missed payment causes a score to decrease, while timely payments cause it to increase.
According to CNN, if you check your score with all three bureaus and find discrepancies in the reports, fix that first, disputing any incorrect information. This includes wrong addresses, accounts you did not open, or payments that went unreported or misreported.
If your credit score falls below 640, before applying for loans, raise the score. The credit bureaus and outside sources now offer programs for individuals who pay bills every month that would not normally appear on a credit report. These include cell phone bills, rent, and utilities. After adding these accounts and showing six months of on-time payments, a person’s credit score typically rises by about 25 points. Some people experience a bigger increase in their score. If you already have a credit score of 640 or higher, you’re ready for the next tip.
Set Goals Regarding Your Debt
According to Forbes, setting goals regarding your debt consolidation helps you get out of debt. Most debtors want to consolidate their debt to achieve one of three goals:
• Save money by reducing the interest rate
• Get out of debt sooner
• Have smaller monthly payments.
For some people, two or more goals fit the reasons they want to take out a consolidation loan.
Set aside some time, about an hour, to review your finances and your life’s goals. Write down on an index card why you want to get out of debt and include the specific goal, such as saving money. Post this index card where you will see it every day, such as on your refrigerator door.
Catalog Your Debt
Before you apply for a consolidation loan, you need to know how much you owe. To do that, gather together the past year’s bank statements, credit card statements, and online wallet statements. Many online wallets, such as PayPal, now offer credit through platforms like Klarna. Make a list of every credit card, lender, and loan with the total owed, the current monthly payment, and the interest rate. Now, you can see your true financial picture. Add up all the total owed amounts. The sum of those represents the loan you need.
You’re Ready to Apply for Your Loan
Follow these three tips to get ready to apply for your consolidation loan from a lender like Symple Lending. When you receive your loan money, immediately use it to pay off all the credit cards and other loans. You’re left with one loan to repay, with two to seven years to pay it off and a lower interest rate than the credit cards provided.
