How to Get a Debt Consolidation Loan?
A debt consolidation loan can be a great idea if you have numerous open accounts with high interest balances. Not only can you save money and pay off those balances quicker, you will have the simplicity of having just one bill instead of several. Other advantages include:
- Carrying a lower interest rate than the debt you consolidated
- The possibility of a lower monthly payment
- Managing your finances better
A debt consolidation loan can be used to bundle car loans, credit card balances and personal loans. In addition, if you are struggling to pay off your student loans, there is a special government consolidation loan department that works on consolidating student loans only.
Home Equity Loans and Other Lenders
A home equity loan is probably the best and possibly the easiest (although nothing is guaranteed) way to obtain a debt consolidation loan. You will be borrowing money against the equity in your home if you go this route. In general, the longer you have owned the home and the more equity you have in it, the more money you might be able to obtain for debt consolidation.
You also may be able to obtain loans from your bank or savings and loan. Credit unions and your 401k are other possibilities, too. The better your credit history, the easier it will be to obtain a loan.
The reality is though, that borrowing against your home remains the best way to be approved for a debt consolidation loan.
The Process
Once you have decided to consolidate your debt and have completed the due diligence needed to select a lender to apply to, then you have to prepare a list of debts. The list will include all of the debts you are going to pay off. In fact, some lenders have been known to put the money in escrow and pay all of the bills off from that account. It helps insure that the funds are really going to paying off the high interest balances.
It typically takes three to six weeks for the process to be completed and for you to get the money.
If you do not get approved for the loan, you may want to consider using a co-signer who has good credit. Both you and your co-signer need to be cognizant of the fact that that if you don’t make payments, the co-signer is then obligated to pay off the debt consolidation loan.