Small Debt Consolidation Loans

Inasmuch as small debts may be just that, small, they can lead to a deterioration of your credit score if left ignored. More than that, they can be a real nuisance when you keep getting calls from the banks and other lenders. The problem is that these small debts can add up to significant debt, and then you have a serious situation. To solve this, one of the best ways is through a debt consolidation loan.

Why you may need a debt consolidation loan

This kind of loan does just that, consolidate your debt into a single loan. Rather than pay multiple lenders, you can be left paying a single loan, often with more favorable lending terms. This way, you get to not only keep your credit score as it is but also improve it further. Of course, that would mean being able to qualify for bigger loans and even better terms, not to mention all the other benefits that come with having a good credit score.

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How do you get one?

There are many sources of small debt consolidation loans, and it only takes a bit of research and effort. All you need to do is research what options you have in your area and then find out what terms they have to offer. The good news is that you don’t have to stick to your geographic location since many lenders can even provide debt consolidation loans online.

But the most important thing to find out is the rate at which the loan is offered. On average, the interest rate is usually about 10.6%. If you happen to have a good credit score and select a longer repayment period, this interest rate can even be lower. On the other hand, a poor credit score often means experiencing higher interest rates.

To get such a loan, the best thing to do is shop around from different lenders. With every application, the lender will perform a soft credit check to determine the rate at which you will be charged. This check will not affect your credit score negatively, because a hard check will only be needed at the moment of approval. That means you will be free to check multiple options without fear of damaging your FICO score.

How much can you expect to borrow?

There is no fixed amount borrowers can expect to receive because every application is unique. But to give you a sense of what to expect, a general rule of thumb is that you can only borrow up to 2x your annual income before tax. For instance, if you earn $50,000 a month, you can apply for up to $100,000. Most lenders prefer if you earn at least $800 a month, but the recommended salary is $2,000 a month.

Many people often ask about guaranteed loan approvals, but unfortunately, there isn’t such a thing. All lenders must assess each loan individually and they cannot just approve all applications automatically.

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