A personal loan for debt consolidation is like getting yourself into a deeper financial hole. If you’re not willing to change your behavior and change your habits of overspending then this method won’t do you any good. In fact, it can quite possibly drive you deeper into debt and perhaps even destroy your credit. But, you can avoid all of that if you follow these few suggestions. Here’s what to avoid when trying to consolidate debt with a personal loan.
First, don’t apply for a personal loan for debt consolidation for bad credit. Many lenders may be willing to lend you money under these conditions. But, you need to know that most of them will ask for a very high credit score in order to qualify for such financing. This means that you are going to have a very hard time getting approved. These lenders may also charge very high interest rates because of the risk involved with giving you their money. If they give you the money, they will simply charge more fees to you later.
Second, find out about any loan terms offered to you when you apply for a debt consolidation loan. This means comparing at least three quotes from different lenders. The most common loan terms you’ll find our balloon payments, interest only payments or a combination of both. Be sure that the interest rate you’re getting a quote for includes all of the applicable fees, not just the origination fee. These types of fees will really add up, especially if you need to pay the loan back soon.
Third, find out about any other costs that may be associated with your debt consolidation loan. You’ll often hear lenders talk about these terms as “expenses”. This is the general way that lenders describe anything that you pay for with their money. Even lenders who don’t use this term will do it because it’s cheaper for them. Make sure that your lender does not include any of these expenses in the interest rate you’ll be charged for the debt consolidation loan.
Fourth, check on your credit report. If you want debt consolidation loans for bad credit borrowers, you need to know that there are reports out there that you can check on. These reports are free once a year and you can check them with the four main credit bureaus (Experian, Equifax, TransUnion, and Experian). The information is usually fairly accurate. If it isn’t, you’ll need to contact the reporting agency and dispute the errors with them.
Fifth, ask for referrals from friends and family. If you’ve already asked several people for references, you’ve probably been referred several times already. The people you ask will likely be able to give you more information than you could ever learn from just reading your credit score. You’re much more likely to qualify if they have already used a debt consolidation loan for bad credit borrowers themselves. This doesn’t mean that you shouldn’t ask others for recommendations, however.
Sixth, don’t be afraid to shop around. Most debt consolidation loans for bad credit candidates come with very typical APR or interest rate quotes. This is where shopping around really helps. Find one lender offering a lower interest rate or better terms than the others. Compare their offers to your own. When you find the best deal, don’t forget to contact your other creditors to see if they’ll also offer a better deal.
Finally, don’t assume that you’ll automatically qualify for debt consolidation loans for bad credit candidates. Some lenders are better than others, especially in terms of trust and how they treat their customers. Take the time to find the right match for you. It may take some time, but it will be worth it in the long run.