NEW YORK, NY / ACCESSWIRE / July 10, 2024 / Paying off multiple credit card balances with just the minimum payment due each month is a slow, tedious and expensive process to get out of debt. Using a debt consolidation loan to bundle your high-interest debt into one reasonable monthly installment payment may be a better option. You can streamline your payments, potentially lower your interest rate, and set a clear path to becoming debt-free.
In this article, we'll share six steps to getting and using a personal loan for debt consolidation.
1. Check your credit score
Lenders typically base their loan approvals on several factors; the most important of these is your credit score. A good to excellent credit score is ideal, but lower credit scores won't necessarily disqualify you. Check your credit score before you apply for a personal loan to understand where you stand.
2. Make a list of your debts and monthly payments
How much debt do you owe, and what do your minimum payments add up to each month? Both numbers are significant because you need to know the total amount of debt to determine how much you need to borrow. You'll also want to find a personal loan with a monthly installment payment that will cost you less than the sum of your current monthly payments.
3. Pre-qualify for personal loans whenever possible
Most online lenders have pre-qualification forms you can fill out to generate a "soft inquiry" on your credit report that does not affect your credit score. This process involves a preliminary review of your creditworthiness based on self-reported financial information, such as income, employment status, and existing debts. While pre-qualification is not a guarantee of loan approval, it can help you understand your potential borrowing power and compare different loan options without affecting your credit score.
4. Compare lenders that pre-qualify you
Debt consolidation loans are available at banks, credit unions, and online lenders. Each of these should provide details on what to expect when you pre-qualify. The information you're looking for is the loan term, interest rate, and any fees the lender charges. Read the fine print and click the info links to make sure you get as much information as possible before making your final decision about which loan to apply for.
5. Select a lender and submit a final application
Once you've selected a lender that meets your needs, it's time to submit your loan application. You'll be asked to enter more details about yourself, including the following:
Social Security number
Proof of income
Monthly expenses
Desired loan amount
Preferred loan term
Consent to perform a credit check
Answer all the questions accurately and submit your application for final approval.
6. Sign the loan agreement and schedule payments
The lender will make their approval decision based on their specific requirements, which may vary depending on the lender. If approved, read the loan agreement, and then sign the loan documents, and the funds should be deposited directly into your checking account within a day or two. Some lenders allow you to have funds sent directly to your creditors, such as your credit card issuers. Schedule those creditor payments and then schedule your installment loan payments. If you can, for convenience, it's best to put your loan payments on autopay.
The Bottom Line
Consolidating debt with a personal loan can be a powerful tool to simplify your finances and regain control over your debt. Remember, the key to successful debt consolidation is to stay committed to your repayment plan and avoid accumulating new debt. With careful planning and diligence, you can achieve a more stable and debt-free financial future sooner rather than later.
CONTACT:
Sonakshi Murze
Manager
sonakshi.murze@iquanti.com
SOURCE: OneMain Financial
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