How can I apply to a Debt Consolidation Loan?
If you would like to consolidate your debts, the process can be relatively simple! Many banks offer consolidation loans so you just need to find the right one for you and apply. However, it is important that you apply carefully so that you know what all the terms and conditions are, and don’t miss out something important.
STEP ONE: Finding the best deal for you
It can be a great idea to use a price comparison website to find Debt Consolidation Loans. You will be able to see a number of options side-by-side, which can help you to pick the right one for you. But, it is worth noting that many price comparison websites don’t show you every option available, so it can be beneficial for you to also look around yourself.
When you are looking for a Debt Consolidation Loan, the two most important factors to keep in mind is the interest rate and the term length, and, unfortunately, you may need a calculator nearby to understand what combination is right for you. For example, if you want your debts to be paid off in 3 years, then you might need to agree to a higher interest rate, but if you are willing to pay them off over 6 years then you may be entitled to a lower interest rate. Ultimately, the most important thing is that your monthly repayments are lowered to an amount that is affordable for you. However, it is usually unavoidable for your total debt repayment over the full term of the consolidation loan to be larger than your original total debt, either due to higher interest rates or a longer repayment term.
STEP TWO: The Application
The most important thing to do when you are applying is to ask for the right amount. This means you need to make sure you are aware of all the debts you want to repay using the loans. This can be more difficult than you imagine as debts are often sold off to new creditors so they might not have the same name that you remember. You might also want to call your creditors just to ask what the exact, current total of your debts are as interest may have been added since your most recent bill.
Once you are certain of the total amount that you need to take out, you can apply to your loan of choice. This means you may need to supply documentation to your provider so it is important to have that ready. This can include:
- Proof of income
- Credit Score check
- Details of your debts
- Other financial information
STEP THREE: Settle your debts and pay off your loan
If you are approved, you can use the loan to pay off your debts! Now you should have just one creditor, and one affordable monthly payment. It is incredibly important that you do pay this loan off. Having so many debts, and struggling to pay them, is likely to have negatively affected your credit score, but if you manage to pay your new instalments on time every month, your credit score could improve.