American’s have debt, lot’s of it.
According to a recent report, the average American has more than $38,000 worth of personal debt–and that number seems to be increasing year after year.
You can start to eliminate it by taking out a debt consolidation loan.
A debt consolidation loan can help you pay off your debt quicker with a lower interest rate.
Before you take out a consolidation loan, though, you should look around to find the best loan for your specific situation. You want to find a loan with the lowest interest rate possible.
Here are some tips for finding the best debt consolidation loans.
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How Large of a Loan do You Need
The first thing that you’re going to want to do when you’re thinking about applying for a debt consolidation loan is sit down and figure out how large of a loan you actually need.
There are many Americans who have so much debt that they’re afraid to crunch the numbers to find out. But in order to obtain a consolidation loan, you’re going to need to get over this fear and add up all your debt.
You should include everything from credit card debt to medical bills to see just how bad your debt is. It’ll give you an opportunity to apply for a loan that will cover the entirety of your debt so that you can wipe the slate clean.
Check Your Credit Score
Another thing that you’re going to want to do before you begin applying for a debt consolidation loan is check your credit score. A low credit score could very well hinder your chances of getting access to great consolidation loans.
Generally speaking, a credit score that sits somewhere in the 700 range is considered good. If your credit score is that high, you shouldn’t have any problem convincing lenders to give you a loan.
But if your credit score is on the lower side, many lenders might shy away from giving you the loan you’re looking for. So it could be a good idea for you to work to bring your credit score up so that you don’t run into any issues when you start your search for the best consolidation loans.
Compare Loan Offers From Different Debt Consolidation Lenders
If you check your credit score and find that you have good credit, it’ll be time for you to start applying for a consolidation loan.
You could put together a list of the different debt consolidation lenders that are out there and apply for loans through them one by one. But there are also websites that will allow you to apply for consolidation loans through a bunch of different lenders at once.
When you take the latter approach, you’ll be able to compare debt consolidation loan offers from various lenders and see what kinds of loans they can give to you. Within a matter of just minutes, you can start fielding offers from lenders who will all compete for your business.
Look For Debt Consolidation Loans With Low-Interest Rates
Your goal when applying for a debt consolidation loan should be to find the loan offers with the lowest interest rates attached to them.
When you’re able to secure a loan with a low-interest rate, you’ll pay less money over time than you would if you were to accept a loan offer with a higher interest rate. Depending on how much debt you have, you could end up saving yourself hundreds, if not thousands, of dollars over the life of a loan thanks to a low-interest rate.
You should also keep an eye out for any other fees that might be associated with loans. Additionally, you should try to steer clear of accepting any loan that will subject you to a prepayment penalty in the event that you decide to pay it off sooner than a lender was expecting you to.
Make Sure a Lender Is Reputable Before Accepting a Loan
Getting a low-interest rate on a debt consolidation loan is very important. It’ll save you quite a bit of money over the long run.
But no matter how low of an interest rate a lender offers you, you shouldn’t work with that lender if they don’t have a good reputation in the debt consolidation industry. You should always do your homework on a lender before taking out a loan through them and see what others have said about them over the years.
You and the lender that you choose are going to have a close working relationship once you accept a loan offer from them. Make sure they’re easy to work with and well respected within the industry by both their peers and their clients.
Avoid Taking on New Debt While Paying Down Your Loan
As long as you’ve followed all the other tips listed here, you should be ready to accept a loan offer from a lender at this point.
But here’s one more tip that you should keep in mind once you agree to take on a debt consolidation loan: Don’t rack up more debt while you’re paying it off! If you do, you could potentially put yourself into an even worse position than the one you were in before.
The Bottom Line…
Taking out a debt consolidation loan could provide you with the financial freedom that you haven’t had in years. It’ll feel so good to climb out of the debt you’ve been living in for so long.
Just make sure you don’t take out a consolidation loan that will be too difficult for you to pay back. Look for one with a low-interest rate that’ll make your debt more manageable in the years to come.