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How to Get a Debt Consolidation Loan

What it is

A debt consolidation loan is a personal loan that allows borrowers to consolidate many debts into just one debt. For instance, if a borrower has a line of credit, a couple of credit cards, and a car loan, the borrower can consolidate all the debt into one line of credit or one credit card. The borrower only ends up paying one payment each month instead of four. Borrowers who take advantage of debt consolidation will access a lower interest rate than the rate being paid on the credit cards and the lower rates will help the borrower to pay off the credit card debt and reduce monthly payments. Household budgeting becomes much easier since there is only one monthly bill to pay instead of many.

Lenders of debt consolidation loans will approve applicants who can demonstrate the ability to make payments on the consolidated debt, have steady incomes, and be able to provide a cosigner or collateral.

Who it's for

Debt consolidation is for people who are having difficult managing a monthly budget. They may have many sources of debt that they are servicing all at one time, including credit cards, lines of credit, car loans, mortgages and other types of debt. Those who can benefit the most from debt consolidation include recent graduates from post-secondary education and people who have high and numerous debt loads. Taking advantage of a debt consolidation loan means less money spent each month, the ability to payoff all debt — especially credit card debt — and the convenience of making only one payment per month instead of multiple payments.

What you need to do to apply

In order to obtain a debt consolidation loan, interested applicants will need to contact a local lending institution and inquire about the different options and rates available. Personal and financial history, including a credit report, will need to be made available to the lending institution.

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