Will I qualify for a Debt Consolidation Loan?
Interestingly, there are some debts that usually wouldn’t be considered within a debt consolidation like a student loan, your rent, bills, mortgage, secured loans, child support maintenance, court fines, council and general taxes and business rates. These are defined as ‘priority debts’. So don’t assume that every debt you have can be put into a debt consolidation programme.
So you need to able to define what debts you have and arrange them into groups so that you know if they are a priority or not a priority if they are unsecured or secured. This will help you seek the best type of debt consolidation programme to suit you and your individual circumstances. It may also help you to get access to any loans quicker.
Non-priority debts include bank loans, store cards, credit cards, bank overdrafts, retail repayment programmes, home collection credit. Now, these can usually be included in the consolidation debt programme and a debt consolidation loan is usually the way to manage this.
So you have to find a way to sort the ‘priority debts’ into a way to pay – these are always often the vital payments each month, while maybe applying to a debt consolidation company to sort out the ‘non-priority’ debts, so all in all the whole of your debts become more manageable.
Because debt consolidation loans try to condense and reduce interest rates, take a multitude of debts into one single payment and then extend the time owed to make the single monthly repayment as low as possible, it helps make everything more affordable and some breathable space to sort the priority loans.
Credit ratings can also be improved if the debt consolidation loan is finished, as long as you pay the full amount each month, which has been agreed, and on time, then it will help get your financial record back on track.
The aim, when you take on a debt consolidation loan, is to make life more affordable for you each month and ultimately less expensive to repay all the loans by the debt consolidation companies to try to re-negotiate the interest rates, with your creditors, to a lower rate.
However, if you don’t qualify for an unsecured loan, you may have to look towards a secured loan, which can put your house as the guarantee against the loan taken. This can be very risky if you don’t keep up the repayments, as you risk losing your house against non-payment of the loan. Make sure you do all your research and discuss all options with a debt consolidation expert or different companies, or the non-profit making charities who offer debt consolidation loans.
It’s unbelievably important to make sure you do not overstretch yourself financially each month if you have made the promise to pay back a secured loan amount each month and on time. Especially, if you have to keep paying priority debts alongside a secured debt consolidation loan.
If you default, it will be a huge amount of long-term financial problems if trying to qualify for any future debt consolidation loans. You can also incur late charges, extra interest added, collection action and negative credit impact on your credit record.
It’s so important to get advice straight away if you do think you are going to default on a payment for any debt consolidation loans, especially if they are secured loans.
However, if you do keep payments on time and you complete your full term agreed to finish the loan, you will be on your way to becoming debt-free. So weight-up the pros and cons of a debt consolidation loan, do your homework, don’t overstretch yourself each month, especially if it’s a secured loan.