Top Debt Consolidation Loans

It can be quite nerve racking to have a large amount of debt, particularly when the interest rates on those debts are excessive. Debt consolidation can provide you with a more manageable solution by reducing the interest charged on your debts or by joining all your separate monthly installments into one manageable amount or a combination of both.

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About Debt Consolidation Loans

Debt consolidation in the simplest term, is the procedure of combining several outstanding debts into just one loan. Credit card balances, personal loans, or any other sort of debt are joint together within a brand-new loan agreement to help borrowers accomplish their repayment objectives in a fast and more efficient manner. By means of a debt consolidation loan, a person applies and obtains authorization for a completely new loan that pays a lump sum. That amount of money received, minus any charges associated with taking out the consolidation loan, will then be used to settle all of the outstanding debts.

Borrowers don’t magically have their debts cleared by means of a consolidation loan; instead they just transform it so that their monthly repayments will be easier to manage or the overall cost of the borrowing (in other words, the interest rate) will become more affordable.

Factors to Watch Out for in Regard to Top Debt Consolidation Loans

When you’re trying to figure out if debt consolidation is the answer for your debt problem, there are certain things you need to review and pay attention to before you start. For instance, lots of money lenders charge several fees for a debt consolidation loan.

Possible fees charged may include all or any mentioned below:

  • Late payment fees – incurred when a monthly repayment is submitted pass its due date
  • Origination fees – incurred when a loan is approved
  • Prepayment fees – imposed when the balance of the loan is repaid prior to its final repayment date
  • Application fees – charged when you are submitting your application
  • Funding fees – incurred whenever a loan is either funded or approved

Such premiums often accompanied the rate of interest offered by the lender on any new combined (debt consolidation) loan. It is crucial to have a clear idea which fees are charged on your loan to ensure that the said loan is an affordable answer for your debt repayment in the long run.

Most of the time, borrowers tend to overlook the penalty for prepayment. The prepayment penalty is incurred when you pay off a loan balance before the final repayment date. Hence, it may not be a good idea if you are thinking to use a debt consolidation loan to settle an existing debt with a prepayment charge or to use one which includes a prepayment fee if your objective is to clear the balance of the loan before its final payment date.

A High-Interest Offer Isn’t All Bad

Debtors will also need to consider the possibilities that a combined (debt consolidation) loan offered will have a higher rate of interest compared to what they expected. The lending companies will check details like your credit history, income, and sometimes other financial assets like the balances of savings accounts, to determine if you are eligible for a loan. If certain qualifications are found unsatisfactory, a considerably higher rate of interest may be offered.

If the situation leads to that, the options are either to wait until your credit rating gets better, and subsequently apply again when you are a better prospect for a new loan or just proceed with the offered combined (debt consolidation) loan in spite of its high interest rate. The second choice is preferable if your current debts are too much to deal with every month or you want to make only one monthly payment rather than several.

Guaranteed Debt Consolidation Loans

Choosing to apply for guaranteed debt consolidation loans may sound tempting especially if your application for personal loan has been rejected. Then again, there is no lender that can guarantee any person will be able to get a loan, there is always some sort of credit assessment that take place. However, every money lender has different set of criteria when it comes to the applicants’ credit score. The difference can sometimes be significant. Some of the companies will only approve applicants with a credit rating above 700 whilst others might be lenient and approve the applicants with 550 credit rating or even lower under certain circumstances.

What Should I do if I am Refused a Debt Consolidation Loan?

Regrettably not everyone is qualified for a debt consolidation loan to begin with.

Yet, there are a few tricks you can try to increase the probability of your next application for a debt consolidation loan to be accepted. Here are what you have to do.

1. Understand Why You Were Refused
All lenders are obliged to send you information regarding your loan application, this also includes an explanation of why your application cannot be approved. It may be due to low credit rating, too many monthly debt obligations or perhaps negative entries in your credit profile.

2. Double Check You Credit Score and Fix Errors
Check out your credit reports totally free one time every 12 months by visiting Annualcreditreport or by writing to them.

If you have credit report issues, make sure to use the available dispute procedure to have them corrected. This process can be complicated, but it is worth the time.

3. Improve Your Credit Rating
Lenders usually need to know that you have a good history of paying your monthly obligation on time, that you don’t max out your credit cards or that you don’t obtain loads of loans. Additionally, they also like to see that you have several credit accounts which you’re managing and repaying diligently. The best combination would be three credit card accounts, two of them are empty and another one with as low balance as possible.

Taking these strategies will help raise your credit score, however in won’t happen overnight.

4. Try Going to Another Money Lender
If you’ve recently been denied a debt consolidation loan from one money lending company but reckon that your credit history is adequate to qualify you for one. Don’t give up so easily, you can always try another lender. Each lender uses a different variety of conditions as a guideline to verify whether a consumer is or isn’t a fitting applicant, it is possible to find money lender companies with a bit lax requirement.

5. Wait for a While
When all else fail, your final option after being refused a debt consolidation loan is to simply wait. Gradually, if you keep on being diligent with your monthly obligation, your credit rating will get better. The previous investigations into your credit standing for new borrowing will fall off your credit history. When the right time comes, you can set yourself up for a successful outcome with your next loan application.

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