How To Get A Debt Consolidation Loan

How do you get a debt consolidation loan?

Obtaining a debt consolidation loan is a smart thing to do to simplify your financial life and to start to get yourself out of debt. They are also a great way to rebuild your credit if you have taken on a little too much and have seen your credit score continue to decline. Getting a debt consolidation loan is actually quite simple. It is not too different from acquiring a secured or unsecured personal loan.
The process to obtain a secured or unsecured personal loan can be broken down into five simple steps.

#1. Check your credit score

Checking your credit score is by far the most important first step in beginning to consolidate your current debts. It is on your credit report that you are going to be able to identify all your current debts that need to be paid off. You are entitled to one free copy of your credit report from each of the three major credit bureaus every 12-months. You should get one copy from each credit agency so that you can make sure that they are all reporting the same debts. This will make sure you do not accidentally leave a current debt off from the list of creditors you should compile. You can use an online credit monitoring service to help you get your one copy from each credit bureau.

Once you have your credit reports, first you may want to check for any errors that can be easily addressed. If there are no errors and all three credit report agencies have the same information, then take a note of your current credit score to see where you stand. If you have a credit score above 600, then you still may be able to qualify for an unsecured personal debt consolidation loan. If you do not, then you may have to consider a secured personal loan option by using an asset as collateral or by finding someone who can act as your co-signer. Examples of some assets you can use for an unsecured personal loan include your home, vehicle, retirement account, or stocks or bonds. The steps for obtaining either a secured or unsecured personal loan for debt consolidation should be identical, except when you are in the planning stage of debt consolidation, it may be best to have an asset in mind that you could use to secure the loan.

#2. List your debts and payments

With your credit report, begin to compile a list of creditors that you would like to consolidate under your new personal debt consolidation loan. You can choose to consolidate all of them or only certain ones, however, it might be best to start with the debts with the highest interest rates. Take a tally of all the debts you want to consolidate and make note of the total amount of money you will need.

#3. Compare loan options

Once you know how much money you are going to need to consolidate all your current debts it is time to prequalify. The prequalification process should only take a few minutes and you will then know if you will be able to qualify for an unsecured personal loan for the amount that you need from an online lender. By entering in your personal and income information and the amount that you are requesting, you should find out within a few minutes if you could qualify for an unsecured personal loan to consolidate your current debts. If you can qualify then you can begin to shop loan offers from various lenders from throughout the country to see which lender works best for you.

To compare lender offers, you may want to look at the rates, fees, and special programs or perks that each lender may offer. Take note that some lenders may offer a rate discount if you select to have the lender pay your creditors directly rather than sending the funds to your account. At Acorn Finance you can compare personal loan offers from top national lenders with no impact on your credit score. Acorn Finance's lending partners can offer personal loans up to $100,000 depending on credit score.

#4. Apply for your selected loan

When you have found an offer that you like, you can apply for the loan directly with the lender. You should make sure you have all the information and documents prepared to complete the loan application.

#5. Accept the loan and make payments

If the loan application is approved, then sign the loan agreement and wait for funding. Funding can take anywhere from 24-hours to a couple of days, depending on the lender. If you are selected to have the lender pay your creditors directly, it may take up to a few weeks for the creditors to see payment.

Why consolidate debt?

There are many advantages to consolidating debt. When you have multiple credit accounts to manage each month, each with its own interest rates and ways to submit your payments, it can get overwhelming. Consolidating debt can make it so you only have one monthly payment to be concerned with. Here are some of the main reasons that consolidating debt is a good idea.

Lower interest rates: Often the debts that are being consolidated include high-interest credit cards and other types of financing that come with some of the highest interest rates. Personal loans can often come with lower interest rates than credit cards. By consolidating all your high-interest credit cards into one lower-interest personal loan, you could potentially save a lot of money over time.

Lower monthly payment: Paying multiple creditors each month with their own monthly payments adds up. A personal debt consolidation loan can help to combine all those monthly payments into one that is less than the combined total, especially if the debt consolidation loan has a longer repayment period.

Help to improve credit score: Debt consolidation loans are a great way to improve your credit score by paying off revolving lines of credit and paying one single monthly payment, that if made on time, can help to improve credit scores.

Quicker way to pay off debts: Credit cards have no set pay-off date. A debt consolidation loan can help you to set a firm pay-off date that may be sooner than credit cards where if you only make the minimum payment, can stretch out the time it takes to be debt-free.

How do you compare debt consolidation loan options?

One of the best ways to compare debt consolidation loan options is to prequalify. One way to get prequalified is by applying to individual lenders. However, this can be time consuming and if they do a hard credit pull it can affect your credit. Online platforms such as Acorn Finance allow you to check offers from multiple lenders by completing one form. In addition, your credit will not be impacted during the prequalification process at Acorn Finance.

When you pre qualify at Acorn Finance, you can view multiple loan offers side-by-side to find out which lender works the best for your financial situation. When you find an offer that you can work with, go ahead and apply for the loan directly with the lender. Some lenders offer same-day approval and you may be able to receive your funds in as little as 24-hours, although funding times may vary.

What credit score do you need for a debt consolidation loan?

Most lenders are going to require a minimum credit score of 600 to qualify for a debt consolidation loan. However, some lenders may require scores much higher. Some lenders may need to see a minimum credit score of 660 or 680 in order to qualify for a debt consolidation loan. There are few lenders that may allow you to borrow money for debt consolidation with a credit score of 560 but they may require borrowers to pay higher interest rates and some additional fees.

Should you improve your credit score before applying for a loan?

It is almost always a good idea to try to improve your credit score before applying for a loan. However, often people who are seeking debt consolidation loans may not be able to take steps to do so before applying. In general, there are several things you can do to improve your credit score that may or not apply to someone seeking a debt consolidation loan. You can address any delinquent accounts. You can try to pay off a credit card to decrease your debt utilization ratio. You can make sure that you continue to make all your monthly debt payments on time. If you are looking to improve your credit score by doing one of the previously mentioned actions but lack the capital to do so, you can consider a few things. You may want to consider borrowing some money from a friend or family member or getting a second job to have the money to pay off the debts. Once you use the money to pay off the debts, you may see an increase in your credit score and be able to qualify.

How do you improve your credit score?

Improving your credit score is one of the best things you can do even if you are actively looking for a new line of credit or a debt consolidation loan. Your credit score can have a major impact on your life, and if your credit score is sub-par, you may find it more difficult to accomplish some of your larger life goals like buying a house, buying a car, or even getting a job in some fields. Here are some of the most important ways you can work towards improving your credit score.
Before you begin taking steps to improve your credit score, you will need to obtain copies of all three of your credit reports for each of the three credit bureaus. You can obtain free credit reports from each of the three credit bureaus once every 12-months.
Pay down revolving credit: Paying off revolving credit sources like credit cards is the fastest way to increase your credit score by decreasing your credit utilization ratio. Ideally, you would like to keep your credit utilization ratio below 30% at all times.
Make on-time payments: Payment history makes up about 35% of your credit score. Continue making all your payments on time no matter what. Any late or missed payments will greatly reduce your credit score.
Avoid new credit: Do not open any new credit accounts. Credit cards, in-store financing, anything that involves a hard inquiry.
Address any delinquent accounts: If you have any accounts delinquent or sitting in collections, reach out to them and resolve them. Sometimes you can even make them an offer at a steep discount that they may be willing to accept just to close the matter. If you do this, make sure you get it in writing and ask them to report that the account has been resolved to all three credit bureaus.
Consider a debt consolidation loan: Consolidating all your current debts into one consolidation loan is a good way to pay off revolving credit accounts and establish a new line of credit that you can make on-time payments to build up your successful payment history. After you have paid off all your revolving credit lines, do not close them. You want to keep active accounts open to maintain the average credit age.

Do you need collateral for a debt consolidation loan?

If you are looking for a debt consolidation loan and can only qualify for a secured personal debt consolidation loan, then yes, you do need collateral. If you qualify for an unsecured personal debt consolidation loan, then no you do not. If you are looking for a secured debt consolidation loan there are many different assets that you can use as collateral to secure the loan. Here are a few common ones that many borrowers use when wanting to secure a personal loan for debt consolidation.
— Vehicles: Vehicles like cars, trucks, RVs, and boats are fairly common assets used as collateral.
— Investments: Stocks, bonds, CODs, and sometimes certain types of retirement accounts.
— Property: Homes, vacation homes, and land deeds.
— Collectibles: Fine art, antiques, precious metals, and jewelry.

How long does it take to get a debt consolidation loan?

If you are seeking a debt consolidation loan from an online lender, the process can be done in a day depending on the lender and if you have all the proper information and documents to complete the loan application. There are many online lenders that you can have access to once you prequalify. Once you pre qualify you can begin to receive loan offers from various online lenders who can process your loan application the same day, and if approved, you can see the funds wired to your account in as little as 24-hours, although funding times may vary. Before proceeding with the lender of your choice you should ask them how long it will take to receive the funds, especially if you need them quickly.

What are alternatives to debt consolidation loans?

There are many alternatives to debt consolidation loans. Some involve changes in behavior while others involve other finance options. When it comes to changes in behavior to avoid a debt consolidation loan you could always get a second part-time job or side-gig and use the extra money solely to pay down current debt. You could always set a strict budget and cut back on lifestyle expenses like dining out and spending money on clothes, shoes, jewelry, etc.
When it comes to financing options you could always refinance your credit cards by opening a new o% APR credit card and transferring the balances of your old cards onto your new card. Another finance option would be to take out a home equity loan or a home equity line of credit to pay off all your debts and pay them off on your low-interest home equity loan.
There are many alternatives to consider if a debt consolidation loan is something you cannot or do not want to do, however, debt consolidation loans are fairly common and a good way to pay off debts, build credit and rejuvenate your financial situation.

Where can you get a debt consolidation loan?

Most banks, credit unions, and online lenders offer debt consolidation loans. As a consumer, the choice is yours as to which financial institution you wish to work with. To narrow down preferred lenders, pay close attention to fees and interest rates. You may also want to take into account features such as direct payment to creditors. At Acorn Finance you can check offers from top national lenders that offer debt consolidation loans. Checking offers does not impact your credit score and can be done within 60 seconds or less.