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The Debt Consolidation Process: Here’s How You Can Consolidate Your Debt

The Debt Consolidation Process: Here’s How You Can Consolidate Your Debt

Let’s get it clear…

It is important to understand what debt consolidation is before we move on to how it can be done. Agreed? Okay, here’s what it is.

Debt consolidation is simply about amalgamating all your debts, usually credit card debts, into one single debt that you will service as a single payment. You can consolidate your debt by transferring it to one credit card with a lower rate. Alternatively, you could get a debt consolidation loan to pay off the other debts then service that single low rate loan.

Whatever your choice, there are certain things you need to look into before starting the consolidation process.

Credit reports and credit scores

You need to know what your credit report looks like and what your credit score is before starting the consolidation process.

Your credit report will help you get a clear picture of how much you really owe and who exactly you owe. This is important because people tend to underestimate their debt and that may cause an application for consolidation to be denied.

The credit score is important to help you during your consolidation negotiations. You see, if you have a poor credit score, you may not qualify to receive the 0% rate credit cards or the consolidation loans. So make sure to check these before starting the process.

Get a clear picture of your debt

Your credit report should help you with this step. You need to know how much you owe on each card, their rates and payments. The idea here is to see which debts are priorities for consolidation in case you can’t get them all in at once.

Check out your options

There are two major ways of consolidating your debt: you could get a loan or transfer your credit card balances to a lower rate card. As far as the loan goes, there are plenty of ways to get that loan and you need to explore all these options to find the most suitable one for you.

Remember to assess the credibility of these lenders before entering into any deals with them. Find out all you can about their requirements, rates and penalties so that you are clear on what you are getting into.

Note that, both options i.e. loans and transfers, come with an attached cost. So be sure to ask about this as you decide which way to go.

Make your application

Once you have made your choice, make a formal application to the relevant authorities. If you are going the loan way, you need to make an application to the lender. Don’t be too fast to move to plan B should your application be rejected; they may just need some clarifications in order to give you the loan.

Once you get the money, pay off your debt as fast as you can. If the loan doesn’t cover everything, pay off the loans with the highest rates or the largest balances first and work your way down your debt list in that manner.

In case your application is completely rejected, seek direction from a credit counselor on how else you can consolidate your debts.

Author Bio

Larry Kane is a credit counselor who has helped hundreds of people consolidate and clear their debt through his private debt consolidating firm. He lives in Maine with his wife and three daughters.

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