Consolidation is a unification of all your outstanding loans, so you have only one loan to discharge instead of multiple loans. In order to combine all your overdue accounts, your credit score is not required to be unparalleled but good. A few direct lenders approbate debt consolidation applications. Chances of qualifying for approval are meagre despite a stellar credit file. A number of factors play a paramount role in determining the possibility of acceptance, such as how much you have to borrow and your previous payment record.
It is vital to note that credit card bills are not consolidated. Multiple credit card consumers should seek a 0% balance transfer if they do not want to juggle multiple payments. Once all your unpaid accounts are merged, you will be accountable for making payments on a personal loan you take out. Finding the best consolidation loan is not a cinch.
First off, there are not many lenders providing these loans. Secondly, they are subject to certain conditions, such as a good credit report. Last but not least, borrowers looking to combine all their unsettled bills are perceived as extremely risky borrowers, which results in high interest rates.
There is no point in combining your unpaid accounts if you end up with an expensive deal. The purpose of consolidation is to avail yourself of a lower interest rate on a personal loan. Here is how you should find the best consolidation loan lender:
- Research, research and research
Accepting the first offer in the first place is the biggest mistake that many borrowers commit. Research is the passport to an affordable deal. Every lender charges different interest rates, which you can learn about only after thorough research. Comparison websites come in handy to take stock of interest rates being charged by different lenders. You should also target a couple of lenders from whom you can apply for a personal loan to pay off all your overdue debts.
Afterwards, you should contact them to learn the interest rates they can potentially charge. Most of the lenders disclose this information on their website, but remember that by no means can any lender reveal to you about rates they will charge unless you formally submit the application.
Interest rates are estimated only after a perusal of your credit report, checking your debt amount and income sources. Research cannot let you know the exact rates you will be charged, but it can provide you with an estimation, which serves as the basis for choosing a lender.
- Get a prequalifying letter
By getting a prequalifying letter, you abate your rejection possibilities. With each lender using unique criteria, finding out whether or not you meet them will advance your application process smoothly. Having a good credit score does not secure your chances of being accepted. So, on no account should you think that you cannot be refused.
Having said above, there are many factors that determine your affordability, and the size of your current debts for which you are seeking a personal loan is one of them.
Having submitted the application, your lender will run a hard check, which leaves search footprints on your credit report. If you are repudiated by the lender, you will have to apply to another one. Then, they will also make inquiries. Each time, your credit points will be pulled because of hard inquiries, lowering your chances of getting the nod. Thereby, you should obtain prequalifying letters from lenders. It will give you insight into which lender will most likely accept your application and prevent your score from being hurt as a result of multiple hard footprints.
- React sooner
When you start feeling it is being challenged to adhere to payments, you should immediately take action. Once your credit score is hurt, you will be offered exorbitantly high interest rates.
You should not wait to consider your alternatives until you fall behind on payments. Doing so can be extremely damaging to your credit rating. It will also affect your finances in the long run. A perfect credit score secures your chances of getting the best loans for debt consolidation in Ireland The good thing about that is that you will be able to qualify for lower interest rates.
Is consolidation an effective strategy?
It is a great strategy if it enables you to clinch an affordable deal. Multiple debts can be a bit challenging to handle simultaneously, and therefore, it is vital to consider your options before falling behind on payments. However, it is suggested that you avoid combining your unpaid accounts if you do not qualify for a good deal. Despite a good credit score, you might end up with expensive deals. Therefore, you should consider other alternatives:
- You can seek financial assistance from your friends and family. They will not mind lending you a helping hand if you need a small sum of money.
- Talk to your lender to see if they can provide you with assistance. They might revise a repayment plan based on your current financial circumstances.
- Consider paying high-interest debt first if you cannot manage all of them together. You will lose your credit points by neglecting other debts, but you can save money on interest.
The final word
There is nothing wrong with unifying your outstanding bills as long as your credit report Is not terrible. Otherwise, your chances of being approved are very slim, and if you manage to get the nod, you will be charged with very high interest rates.
You should always consider your options before falling behind on payments. Make sure you explore other alternatives before applying for a consolidation loan. Assess your repaying capacity carefully so you do not struggle with payments next time. Otherwise, you will have to bear dire consequences.
