Questions to Ask While Choosing a Debt Consolidation Loan
Isabella May 26, 2018
Debt consolidation loans could be used for paying off your credit card debts. However, these loans would be varying in terms of the repayment period, amount, and also, the interest rates. When you are looking for a debt consolidation loan, you must ensure that you are shopping around for identifying the best loan. Here are a few pertinent questions to ask before you make the right choice.
Am I Eligible for a Debt Consolidation Loan?
If you have been defaulting consistently on your debt repayments, your credit may have been adversely impacted. So with a poor credit score and a bad credit report, it could be difficult for you to qualify for a debt consolidation loan. However, if your credit score is good, you could still be eligible to apply for a debt consolidation loan and financial institutions would be interested in accepting your debt consolidation request if they find you creditworthy.
Is Debt Consolidation Loan Actually a Brand New Loan?
Debt consolidation loans are an effective way of making debt repayment far more manageable. Instead of making multiple minimum monthly payments, you could use debt consolidation loan for repaying all your debts with just a single monthly payment. Some of the debt consolidation programs, however, would be operating just in the same way as consumer credit counseling where the monthly debt payments are combined instead of granting you a brand new loan. Seek expert help from trustworthy sites such as nationaldebtrelief.com for perfect solutions.
What Is the Actual Interest Rate of Your Debt Consolidation Loan?
The actual interest rate on your debt consolidation loan would be a crucial factor in your decision to choose a debt consolidation loan. The precise interest rate would be impacting the overall cost of the debt. The higher the rate of interest, you would require paying more for your loan. However, you may not be qualifying for a relatively low-interest rate for your debt consolidation loan if you are having a poor or negative credit history.
Is Your Debt Consolidation Loan Legitimate?
There are too many debt consolidation scams these days. There could be situations when you could be taken for a ride easily. So you need to be extra careful and cautious while borrowing. Make sure you are taking a loan from a legitimate bank or financial institution. Do not pay upfront fees for getting a debt consolidation loan. It is best to always trust your instincts. If you sense that something is amiss, it is better to opt out from such a loan.
Do You Think that Debt Consolidation Loans Could Be Hurting Your Credit?
Debt consolidation could be impacting your credit depending on the precise options you choose. Suppose you are opting for debt consolidation simply by taking out a personal loan for paying off all your credit cards, you would find that your utilization ratio actually goes down and this causes your credit score to actually go up. However, your credit rating would be dropping if an underwriter seems to worry about the fact that you may end up in new debts on the balance-free credit cards. In this context, you must understand that whether you are choosing a credit card or a loan, you are actually requesting for a new credit and that implies a hard inquiry about your credit score.
The objective of debt consolidation is to ensure that your debt repayments are more affordable. You must ensure that the monthly payments are complementing your budget. If you are unable to afford your monthly repayments, you would be heading towards more trouble in the near future.
Isabella Rossellini is a marketing and communication expert. She also serves as a content developer with many years of experience. She has previously covered an extensive range of topics in her posts, including business debt consolidation and start-ups.