Do I qualify for a debt consolidation loan?
Debt consolidation is a way in which you can take all of your unsecured debt and consolidate it into one payment. There are several ways in which you can go about this and how you go about it depends on what your credit situation is.
For example, a homeowner with reasonably good credit may find that they are able to refinance their home and borrow against the equity. This means refinancing for the value of the home, paying off the old mortgage, and keeping the difference to pay off debt. Some individuals can have $25,000 or more in their hands to pay off their debt, leaving them with one payment per month that takes care of everything.
Another option is to utilise the services of a debt management company and take the options that they have. This is an option that you can take regardless of credit history. If you have unsecured debts and a need to consolidate it in an effort to reduce what you owe and pay it off faster, then you qualify. However, you have to have debt that equals at least $10,000 and it cannot exceed a certain amount depending on what debt consolidation method you use.
In the case of the debt consolidation loan, those with good credit are more likely to qualify. These are the individuals who see a problem coming and they take action before it can ruin their credit. There are some lenders that will loan to individuals with bad credit, but it is very difficult. There is also the fact that the interest rate could simply defeat the purpose of securing a debt consolidation loan if bad credit is a part of the equation. That is when a person with bad credit may wish to exercise the option of going with a debt management company.
The debt management company can arrange a debt agreement, which is a legally binding agreement between you and your creditors. You say you will pay them a certain amount each month and they will say that they will honor that. However, it has to be an amount that both parties agree upon before the agreement is final.
There is also the option of an informal arrangement, which is not binding. There is also the fact that not all creditors will agree to this, so it can be difficult to combine all of your unsecured debt into one payment.
A Part IX Agreement is similar to bankruptcy, but without the repercussions of bankruptcy. It is a legally binding agreement that allows you and your creditors to reach a mutual decision regarding how you will solve your debt.
So if you do not qualify for the loan, which is likely if you have bad credit, you now know that there are other options for you to take advantage of. Make sure you do your research to find out what will work better for your particular situation. This means look at requirements, how it will really affect your debt situation, and if you are able to meet specific terms.
Other Question Categories
|
Credit Card Comparison