Since there is no debt counselor helping out, it is best for you to study carefully how the debt consolidation loan process works. If you are intent on using this type of debt solution, you want to make sure that you can implement the program correctly.
The first step in debt consolidation loan is to know how much debt you have to pay off. There are some type of debts that charges prepayment penalties so you may want to consider them before including in the loan amount that you will apply for. The best debt to pay off through this debt relief program are credit card debts, medical bills, and other forms of personal loans.
Determine the debts that you can pay off immediately, total the current balance and take note of any interest rate that are added to your monthly payments. Home equity loans is a part of this but you have to consider that some type of mortgages do not allow prepayments. Make sure that you only borrow what you need for debt payments. The aim of this program is not debt reduction so keep your debt balance to a minimum. It will help you save on payments in the long run by saving on interest – which we will discuss in a later step.
The next step is to find out how much you can afford to pay your debts. By creating a budget plan, you will get your income and deduct your expenses to get the difference. That figure will be your basis for the payment term of the loan that you will apply for. The bigger the amount that you can spare, the shorter your term will be and the faster you can get yourself out of debt.
When you know your loan amount and payment term, you should identify the interest rate that your loan should have. One of the goals of debt consolidation loan is a lower monthly payment that is possible through a longer period of payment and a lower interest. This is how you save up on your debt.
Once all three details are identified, you can proceed to look for a lender who can provide you with the specifications that you need. Look for more than one lending company so you can weigh your options. If you find a lender that can give you the best deal in terms of interest rate, find out their requirements. You have to prepare documents like your proof of income or employment. Then fill up the application forms. Submit all of these and wait for the approval of the lender.
As soon as you have the approval and the check containing your loan, pay off your debts. This is very important because the temptation to use it on something else may be too strong. Do not give in and only use it as you intended.
After your debt had been paid off, close off any credit card accounts that you do not need. If you wish to retain one, choose the one with the lowest interest rate. Do not carry it with you and strictly use it for emergencies only.
Make a debt payment plan to ensure that you will not miss out on any payment for this one loan that you have.
Lastly, grow your savings. This will help keep you out of another debt situation. In case something happens to compromise your ability to earn, you can fall back on this fund for the meantime until you can earn again. Any emergency expense will not have to use up your debt payment too. Be wiser about your finances and try not to skip on any payment. This is how you make debt consolidation loan successful.