The 3 Steps All Borrowers Must Take Before Applying for a Debt Consolidation Loan

The first step that a borrower should take before applying for a debt consolidation loan is to find out how large of a loan they actually require. You may feel like you are so far into debt that you are scared to actually begin the process, but if you do not start the debt consolidation process, your debt will only continue to increase. When considering what kind of loan you will need, look at: your annual income, credit score, loan purpose, and debt-to-income ratio. These four things will help you determine what type of loan best suits you. If you need a loan that is under $100,000, you should consider either a personal loan or an unsecured loan. If your needs are somewhere between $100,000 and $1,000,000, a home equity loan is what you will likely need. The only way you can ever begin the process of applying for a debt consolidation loan is by crunching your numbers. If you are in debt, start the process as soon as possible to avoid falling further and further into debt.

After you have figured out what kind of loan suits you best, the next step is to compare rates from several lenders and different special loan offers they may each offer. You may be tempted to quickly go with the first lender that approves you for a loan, but this is a common mistake. A simple rule is to get at least 3 loan quotes before making a final decision. Also, when comparing quotes from different lenders, you may become overwhelmed. Sorting between rates and several fees may leave you confused about which quote is really best for you. When in doubt, look for the quote’s APR. The loan’s APR will give you the total cost of the loan.

Once you have figured out what type of loan is best for you and shopped around to find the best rate for you loan, there is one final step before accepting a loan. Always make sure to confirm that the lender you are dealing with is credible. Although it is always smart to go with the loan with the lowest APR, you also want to make sure that the lender who is offering you the loan has a good history with other customers. Never jump into a loan agreement before thoroughly researching the lender you are working with. The last thing you want is to be lured into a loan scam that will only spiral you further into debt and put more stress into your life.

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