If you are struggling with debt, you may be considering a debt consolidation loan. This can be a great way to get your finances back on track, but it is important to choose the right loan for your needs.
When it comes to debt consolidation loans, there are a lot of options out there and lots of lenders to choose from. How do you know which one is right for you? Keep reading to find out the 5 must-knows before taking out a debt consolidation loan.
What Is The Best Debt Consolidation Loan?
Not all consolidation loans are created equal. The key to finding a good debt consolidation loan is to choose a reputable, low-cost lender. Based on The Ultimate Guide To Debt Consolidation, here are some factors to consider when selecting a loan company.
Be sure to choose a lender that offers direct payment to creditors. This means the lender will pay off loans on your behalf and communicate with all of your creditors, making sure the process goes smoothly. This can help improve your credit score, save both time and hassle, and will reduce your temptation to use the money for something else.
Will you be able to save money on your loan? When you consolidate your loans, you may have to pay another set of fees, and when you pay off your existing loans, you may have to pay early repayment fees. The savings should outweigh the initial setup costs since you will hopefully pay less in interest.
Using a debt consolidation calculator is helpful to see how much money you could save with a particular debt consolidation loan.
Keep in mind that the interest rate you qualify for will vary depending on your personal situation. To find out what interest rates you might incur, ask for a Free Loan Assessment.
Bonus tip: Make sure your lender offers personalised interest rates, as some lenders charge the same rate for everyone which could result in you getting overcharged.
Before you apply for a debt consolidation loan, make sure your lender can provide enough loan funds to cover all of your existing loans. Loan amounts vary between lenders, so it’s important to shop around and compare options.
Make sure to choose a lender that offers both secured and unsecured loan options so you can pick the one that best fits your needs. Unsecured debt consolidation loans are typically capped at $30,000, however, some lenders like Loansmart offer unsecured loans up to $50,000 before requiring security.
Bonus tip: Make sure the lender provides assistance if you have a bad credit score. This way, you may still be able to get the loan you need even if your credit score isn’t perfect. Learn more about Bad Credit Debt Consolidation Loans.
If you need to borrow money and consolidate loans, pick a company that can lend up to what you need. Choosing one that has a 7-year loan will make your payments easier. Check out these stories of actual borrowers who did exactly this. Some of them had existing debts in excess of $50,000 and were still able to get a top up.
When considering how long you need to repay your loan, remember to strike a balance between comfort and speed of repayment.
It’s essential to make sure your repayment plan is affordable and you have room to save (so that you won’t have to borrow further) while keeping your monthly repayments high enough to pay off your debt faster – that’s the perfect balance. In order for this to be the case, you may require a maximum loan term of 5 years or more.
Loansmart offers a maximum loan term of 7 years, and a minimum loan term of 6 months to ensure that your repayment plan is affordable.
Before you apply for a loan, it’s important to research the lending company to make sure they have a good history of approving loans. One way to do this is to check the client reviews on their Google Business Profile. This will give you an idea of how likely they are to approve your loan. Keep in mind that every credit check impacts your ratings, so you don’t want to apply for a loan with a company that has a history of declined applications. By taking the time to research the lending company before you apply, you can increase your chances of getting approved for a loan the first time.
Bonus tip: You can also use client reviews to make sure the lender has a good reputation and provides excellent customer service. It is important to choose a lender that allows you to make extra repayments without incurring fees and offers flexible repayment options, such as weekly, fortnightly, or monthly repayments.
Choose a Loan That Best Suits Your Needs
So there you have it, that were 5 factors that are important to consider when selecting a loan company. Choosing the best loan company will enable you to find the perfect debt consolidation loan that will best suit your needs.
Loansmart is a reputable low-cost lender who ticks all of the boxes. You can apply for a Loansmart loan online FAST right now or contact one of Loansmart’s helpful experienced lending consultants to discuss if a debt consolidation loan is right for you.