DON'T APPLY FOR THAT LOAN YET...
Nov. 3, 2016
Many people struggle to pay their bills. A lost job, medical emergency and more can make it so people can't meet their regular financial obligations. There are ways individuals can address these problems. It's possible to get a loan consolidation line of credit, before you need to declare bankruptcy.
This is a situation where an individual will take their many different debts and take out a loan to pay them off. A person will now only have one payment a month to make rather than several. It's possible for this to be a better situation. There are debt consolidation loans that offer low-interest rates and low monthly payments. A person could pay less each month for a single loan than making several different loan payments.
Financial Problems Remain
The reality of a debt consolidation is that people haven't resolved their debt. They often feel as if they've simply shuffled their financial problems around. It may offer some individuals a false sense of security. People are often not able to move forward because their old debt remains part of their financial picture. According to financial experts, over 77 percent of individuals who take out debt consolidation loans will take on additional debt. This eliminates any financial gains created by the getting the loan.
Long Payment Period
When a person takes out a loan to consolidate their debt, they are still in debt for a long time. They may be able to get a lower monthly payment, but they'll probably be paying it for an extended period of time. When they are finished paying the loan, they may have paid more money than anticipated. It's important for people to understand their lower monthly payment could come at a big price.
In some situations, individuals are not able to get a debt consolidation loan unless they provide some sort of collateral. This could be their car, house or another valuable item. This means if an individual struggles with making payments on their loan, the lender can seize a person's car, home or whatever was provided for collateral.
Prior to applying for a loan or a debt consolidation loan, it's important to look closely at all the current debts and income. It's essential to know all the interest rates, loan balances, terms and more. This will provide a realistic picture of the loan amount needed, and how it would fit into a current budget.
The first step in obtaining a loan or debt consolidation loan is for a person to know their credit score. There are three major credit reporting agencies. They are TransUnion, Equifax, and Experian. Every year, a person is entitled to one free credit report from each of the credit reporting agencies. It's important to make certain everything on the credit report is accurate. If there is a mistake, the credit reporting agencies have procedures in place so it can be corrected. A person's credit report could determine the interest rate they are offered for a loan, the type of loan and more.
Research Loan Options
It's a good idea for a person to look at the types of loans they can qualify for from a credit union, local bank, online lender and more. Prior to applying for a loan, it's important to know the credit requirement for a lender. Some will require a minimum credit score; some won't lend to individuals who have a bankruptcy on their credit report and more.
Should a person be rejected for a loan, they need to understand all of the reasons involved for being turned down. It may be good to contact the lender and ask what needs to change financially to be approved.
Georgia Debt Relief of Savannah is here to help. Call us anytime to ask questions or determine if an expert could benefit you. Loan consolidation can be tricky!