The idea is plain, you get a single loan for a fair amount with which you repay all your outstanding debt and obtain all the benefits associated with this procedure. Not only the process is plain but also the requirements needed to get approved for a debt consolidation loan are undoubtedly effortless to achieve.
Benefits of Debt Consolidation Loans
Debt consolidation loans can lightly reduce the number of payments you have to do each month. Since the money obtained from a debt consolidation loan is used for repaying all your outstanding debt, then, the only debt left is the consolidation loan which implies a single lower monthly payment each month instead of the numerous payments that you had before which combined were surely a lot more expensive.
The interest rate charged for the money you will owe on your consolidation loan will be significantly lower than the overall average rate charged for your credit card balance payments, cash advance payments, unsecured individual loan payments, etc. Thus, the resulting monthly installments will be significantly lower.
In the long run, a lower interest rate reduces the overall interests paid for your debt. Thus, by consolidating, you’ll be saving thousands of dollars over the entire life of the loan. If you destine these savings to repaying your debt, you can get debt-free sooner and with less hassles than if you determined to repay your debt as it was.
Requirements And Approval
The approval process for debt consolidation loans is fairly elementary. You just need to pack some online forms as most lenders have online sites featuring their financial products. After you submit your application, it will be considered and in a matter of minutes, a response will be sent to you as to whether you’ve been pre-qualified.
Then, you’ll be required to submit some documentation backing up your application statements like copies of your pay checks, tax receipts, etc. With this documentation the final loan review will take place and you’ll be contacted as soon as the loan has been approved. The money will be then made available either in cash or by depositing it into your bank account.
However, if you work with a consolidation agency, they’ll retain the amount and proceed to cancel all your outstanding debt with it. This is due to the fact that consolidation agencies want to make sure that the money is used for the purpose it was intended to and not for incurring on other expenses.
As to the requirements, you need to have a fair credit and income. Some credit delinquencies can be overlooked but the income requirement is essential. You need to prove that you’ll be able to meet the monthly payments on your consolidation loan without sacrifices. Moreover, in most cases, to get a low interest rate on your consolidation loan you’ll need to have equity available on your home in order to secure the loan.