When you haven’t achieved financial freedom, you may end up taking many loans to help to accommodate your lifestyle. When you have previously taken credit card loans, student loans, car loans, mortgages, health care loans, and much more, you may feel unsettled. If you want to prosper financially, you need to put all your needs in order.
Debt consolidation allows you to consolidate all your debts into one big loan that you can pay comfortably. When you go the debt consolidation way, you are assured that you won’t have to incur the individual interest rates for the different loans that you have. You will just suffer the urgency of having to pay the bigger loan.
You may have heard about debt consolidation, but do you understand how it works? Let’s dive into understanding better about debt consolidation. You can consult a licensed money lending company like Oasis Credit Services Pte LTD.
What Is Debt Consolidation?
Debt consolidation is the process of combining debts into one large payoff loan. You combine the amount of all the smaller loans that you have and then request a debt consolidation loan from a bank, money lending company, or any other financial institution.
You can then pay off all the other loans and just remain with the bigger loan that you will be required to pay off monthly. The debt consolidation loan offers a lower monthly payment due to a longer repayment period.
As much as you might think that the interest rate might be a bit lower, it is not always the case. However, you can talk with the loan officer to get the best deals. The debt consolidation loans also come with some extra fees.
This may include a loan setup fee, bank transfer, closing costs, and annual fees. When you consolidate debts it’s not like the debt is being eliminated. It is just being transferred to make a bigger loan for more convenience.
How to Apply For a Debt Consolidation Loan?
Before you decide to apply for a debt consolidation loan. First, ensure you check your loans and see the amount that you will need to consolidate your loan. Just know there are some fees you will still need to pay to make the process easier. However, in the long run, it is a safer alternative than having different types of loans with many money lending companies.
Step 1: Fill Out the Loan Application Form
First, you will need to have checked whether the licensed moneylender offers the debt consolidation loan. Once you confirm that, you can fill out the online form application keenly.
Step 2: Get Your Documents Checked Online
Due to digitization, it is possible to apply online before actually going to the physical location of the financial institution. Therefore, when you apply online, the lender will check your credit and debt to income ratio.
They will want to know whether you are capable of paying back the loan after it is consolidated. This is because debt consolidation loans are normally for a huge amount.
Step 3: Get a Request to Provide Your Documents
After speaking to an agent online, you might be requested to go to the physical location to show evidence of some of your documents and the loans that you have.
Also, remember to go to the bank statement that shows your income level. The money lending company will want to know all your debts, finances, identity, insurance, and other documents to verify your truthfulness. Transparency is key!
Step 4: Evaluation
The moneylender will also evaluate you to see how capable you are to pay off the loan. They might even check your credit score, considering it will be like a long-term loan they are offering you so that you can pay up the loan on time.
Step 5: Get Two Options
Based on the kind of loans they offer. The money lending company can either decide to pay off the loan for you. Or provide the cash so that you can pay it off.
In case you feel you won’t be able to pay the loans with discipline, consider the first option. This is better to ensure you only pay off the loans without any other motive.
Step 6: Pay Off the Many Loans
Ensure you pay off the many loans that you have and just leave the one big loan. Also, read the terms and conditions well before agreeing to sign the contract to make it easier to pay off the monthly payment attentively without any issues. You will feel at ease in that way.
In case you don’t get the loan, don’t feel bad. Instead, work on paying the loans individually or seek help from another licensed money lending company but not loan sharks.
Types of Debt Consolidation Loans
When taking up the debt consolidation loan. There are two options; secured debt consolidation loans and unsecured debt consolidation loans. If you choose a secured loan, you will need to provide one valuable asset as your collateral.
This works as motivation for you to pay off the loan so as not to lose your asset. You will find that the interest rate is a bit lower in this. If you choose an unsecured loan, the interest will be higher because you haven’t offered anything as collateral.
Debt consolidation helps you to pay off all other loans and just remain with one large one. Therefore, try and shop for the best money lending company before you settle on one. The different financial institutions offer unique repayment and interest rates.
Therefore, choose one that you feel won’t bring any sort of pressure on your side. You will feel at ease when you just have one monthly payoff rather than many different loans.
You can also opt for other types of loans like personal loans, wedding loans, holiday package loans, SME microloans, business financing, and entrepreneurship loan, for your different needs. Make your choice!