Securing a debt consolidation loan has several benefits – two of which are most important. For one, it allows you to transfer high-interest credit to a lower-interest card/loan; all while consolidating all of your credit into a single convenient payment. Secondly, this type of loan has been known to positively affect your credit score. The process for acquiring debt consolidation loans is simple and as follows:
- Find Out Your Credit Score
To get the best loans with favorable terms, your credit score usually needs to be in the range 690-850. Keep in mind that there are quite a few debt consolidation loans available in the bad-to-fair credit range of 300-629; but you are unlikely to get the best interest rates. To facilitate a good FICO score, you can pay off your smaller debts, rectify any current late payments, and fix any errors.
- Create a Spreadsheet of Your Debt
Gather all of your credit card data and other preexisting loans together to see how much you owe. If you have an account with Discover or Capital One, they already do this for you for free if you sign up to the relevant program. Your goal for a loan should be to pay less each month than you are currently paying. Use an online debt consolidation calculator.
- Compare and Contrast Lender Terms
You’ve got about three viable options when searching for a lender: an online outfit, a bank or a credit union; these all have pros and cons. With some you can pre-qualify, whereas with others they will execute a hard pull of your credit file to determine what loans they can offer. Keep in mind that the latter option may reduce your score for a little while.
- Pick One or More and Send in Your Application
Debt consolidation loans are big business; so you will have plenty of options. Choose the best few and complete the application; you’ll need to find documents such as pay stubs, utility bills to prove residence, etc. If you think your FICO score may adversely affect acquiring a loan, consider having a co-signer who has great credit.
- Finishing Touches: Accept Loan Offer
This step is actually important: in most cases, the lender will offer to send the entirety of the loan to your bank account, or a specified portion to your creditors. More often than not, you will receive an even better interest rate if you agree to let them send that portion to your creditors instead of to your bank account. Either way, 30 days after whatever option, you will begin making your payments on the debt consolidation loan.
Contact BT84 Commercial Capital & Business Solutions today to learn more about our comprehensive debt consolidation program.