How to Consolidate Your Debt

What is debt consolidation? Debt consolidation is a concept that is used in managing debt that has become unsustainable. It involves replacement of all your debt repayments with a single payment source that is a lot easier to manage. It is also called debt refinancing and you are the borrower, will take out a single loan, sometimes at a lower interest rate, in order to replace all the other loans which are becoming harder to manage.

People take up consumer loans for a number of reasons such as paying mortgage, credit card loans, buying a car or solving some short-term financial emergencies. This is what is known as consumer debt. The problem is that many people eventually pile up on this consumer debt, particularly on the credit card debt at high interest rates. Very soon, they find all these payments unmanageable and they find themselves at risk of default or going bankrupt. One of the best ways in which you can sort out your financial mess is by applying for debt consolidation. In order to get a good debt consolidation option that will be beneficial to you, there are certain steps that you need to follow. These include the following:

Lookup your credit reports as well as the credit score

Apply for your credit reports from all the three credit reporting agencies. You can do this at least once per year for free. For subsequent requests, you will have to pay a fee. It is important to review your credit reports first in order to ensure that you are eligible for debt consolidation agreement with your creditors. The credit reports must have a list of your debts.

Take your debt inventory

Make a list of all the debts which you owe your creditors on all the loans and cards that you want to consolidate. Look at the interest rates of these debts as well as each of the monthly payments. Here, you will need to prioritize on those debts which are most important to you. You will need to begin consolidating those balances which have very high interest rates as these are the ones most likely to sink you financially.

Research your debt consolidation options

There are various debt consolidation options which are generally available for you. For example, you could do debt consolidation by taking a loan from your local bank or from a local credit union. Other options include online lenders that specialize in debt consolidation. You could also transfer your balances on your interest credit cards to a lower interest credit card option. When you are getting your consolidation loans, ensure that you are dealing with reputable lenders that will not rip you off.

Before you submit your application for consolidation, check if the lender is able to provide you with detailed information regarding its credit requirements so that you can submit your applications with a greater degree of certainty. For example, what is the lender’s minimum credit score requirement? Will they extend loans to you have filed for bankruptcy before? You need this information beforehand in order to avoid unnecessary rejections at a time when you are grappling with financial difficulties.

Apply for the debt consolidation loan

Once you have fulfilled the above requirements, it is now time to apply for a consolidation loan. Most lenders will offer you feedback almost instantly. If they reject your application for a consolidation loan, take a careful look at the reasons why your application was rejected. If you think the reasons why you were rejected do not apply to your situation, you can call the lender and ask for reconsideration. In case, you are able to crack it, you can call debt counseling agencies such as Debt Mediators to assist you with the application process in order to ensure success. They can offer you a debt management plan that has a better success of going through with your lenders.