While you can apply for a debt consolidation loan to combine virtually any types of debts there are a few that are best suited for this particular debt solution. The most prevalent is debt is credit cards. Because credit cards are infamous for having high interest rates it often makes sense to consolidate balances from multiple credit card into one debt consolidation loan. Unsecured personal loans are also quite popular. Just be certain there is not a prepayment penalty attached to the loan before consolidating. And finally, medical bills are often consolidated to a debt consolidation loan. Whether you have high credit card balances, multiple unsecured personal loans or your medical bills are piling up, a debt consolidation loan may be the answer. Before reading the loan tips listed below be sure to take a look at additional pros and cons of debt consolidation loans.
Debt Consolidation Loan Tips
Review your Credit History
Before applying for a debt consolidation loan do yourself a favor and check your credit report and credit scores. There are plenty of free credit report websites out there. AnnualCreditReport.com is a website jointly operated by the three major credit reporting agencies in the United States that allow consumers to receive up to three free credit reports each year. The information provided is easy to understand making it easy to check your report for accuracy.
Learn your Debt Consolidation Options
Now that you know what your credit looks like it should be easier to decide what types of consolidation loans are available to you. Perhaps you have an asset and would like to investigate a secured loan with the hope of attaining a lower interest rate. Or maybe you have a credit score in the 800’s and want to try an unsecured loan with no collateral. You have plenty of options available. Just make sure you decide on the best option for your needs.
Debt Management Plan
If you feel you have a severe debt problem you may want to reach out to a reputable counseling agency. In some cases a debt management company can negotiate a lower interest rate on your credit cards or personal loans if you agree to a 3 to 4 year debt management plan.
Do the Math
This cannot be stressed enough. A debt consolidation is not a catch all. If the terms are not suited for your exact needs your debt issues will keep arising. Take a look at a debt consolidation loan example and do the math. Make sure the terms of your debt consolidation loan empower you to become debt free.
Commit to your Plan
Transferring your credit card balances, personal loans and medical bills over to a debt consolidation loan is not the end of your debt troubles. It is simply a good start. Be aware of the pitfalls of falling back into debt by not fully committing to your plan or opening up additional credit cards.
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