Consolidating your loans can save you a lot of money if you go about it correctly. Rolling together all of your little loans and debts into one bigger one, with only one monthly payment, can help you a lot depending on what your priorities are. You’ll have many things to consider such as whether you want a personal loan or a balance transfer credit card. You’ll also have to figure out whether it’s more important for you to lower your monthly payment by stretching out your repayment period, or whether you’re looking to pay less in the long run with a lowered interest rate.
It’s always good to know that you have the option of applying for a personal consolidation loan, but it can be confusing when trying to figure out how to get started. We’ve outlined each step of the process below so keep reading to see how you can start saving money with a consolidated loan immediately.
1. Make a list of your debts
It would be difficult to identify what you need to do and where to get started without first calculating all of your debts. Make a list of all of the credit cards, department cards, and other companies you owe money to. Then add the total amount that is due, your monthly payment, the interest rate on the loan, and whether or not the loan is secured or unsecured.
2. Check your credit history
This is important because one of the main things that lenders will check for is your credit score and history; this will help them make the decision on whether or not to grant you a loan as your credit score and history will reflect how much they can trust you to pay them back.
You can pull a free copy of your credit report from a number of sources online such as Equifax or Credit Karma. You’ll need your score to be around the mid-600s or higher to be approved for a loan. Though there are still chances of getting a loan approved with a lower score, you should probably wait and improve your credit to better your chances of receiving a loan.
3. Research different types of consolidation loans
There are many financial institutions and lenders who offer consolidation loans. As a matter of fact, you’ve probably received offers in the mail in the past. Be sure to consider and compare important aspects such as the interest rates which are being offered, the length of the repayment period, how much your monthly payments come to, and what will be the total amount you repay in the end.
4. Apply for the loan
Once you’ve picked the perfect lender for you, then go ahead and apply for your loan. You will need to provide all the paperwork they require; this usually comprises personal identification, proof of income, employment information, and other similar effects.
If you’re approved, the lender will most likely send you a check. USE THE MONEY TO PAY OFF ALL OF YOUR SMALLER LOANS. We cannot stress this enough. Many people, after receiving their loan check, pay off just a few of the smaller loans and decide to continue paying some of the others as monthly payments. Do not get distracted by the large amount of money you’ve been given; use it for what you intended to use it for.
Remember, just because you are facing financial difficulties, it does not mean that your only option is to consolidate your loans. If your problems are temporary, you may want to reach out to credit card companies and other lenders you owe money to and ask to suspend payments for a certain period of time or lower your monthly installment. With federal loans, you may qualify for income-driven repayment plans. Know what your options are and take the necessary steps to give you financial stability today.