Reasons Why Obtaining A Debt Consolidation Loan Is A Good Idea
A personal loan that allows the borrower to move numerous debts into one account to be payed off in one monthly payment is a Debt Consolidation loan. If you have 3 credit cards for instance, a debt consolidation loan would allow you to combine these loans and would allow for the elimination of the credit card debt. This way, you must only make one loan payment each month compared to 3 separate credit card payments.
Before acquiring this particular type of consolidation loan, there are many advantages and disadvantages. The following sections will explain the criteria necessary which you will need so as to qualify for a debt consolidation loan.
The benefits of a Debt Consolidation Loan are:
Often your debt consolidation loan would have a lower interest rate than you are presently paying on credit cards. The loan should therefore decrease your interest payments and help you eventually eliminate your credit card debt. You could also be able to decrease your total monthly payments with a refinance, the extended terms or debt consolidation loan can offer as well as the interest rates which are lower.
The good thing is that you replace many monthly payments with just one payment. This certainly makes the process of being able to budget your monthly household a lot simpler. Since the loan interest rates are usually much lower, you can apply more money from one monthly payment directly to the principal and get out of debt much sooner than just making the minimum payment on various other credit cards etc.
Do I Qualify for a Debt Consolidation Loan?
To be able to qualify for a Debt Consolidation loan, you have to meet the following criteria: You should be working or have some source of income in order to allow you to repay the loan. The banks calculate your ability to pay a loan according to your earnings. It is essential to bring your most recent pay stubs and the previous year's tax return to the bank or the lender when applying for the loan. The bank will need a copy of your monthly finances to determine if you could meet your loan payments. Lastly, you might need some security such as a house or a car or maybe even a co-signor to be able to meet the prerequisites set up by the lending institution for debt consolidated loans and refinance.
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