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Taking Care of Your Financial Health

If you’re having problems with your finances and you feel that debt consolidation is the way to go, you’re taking a very important step towards taking care of your financial health.  At the same time, you need to know the types of things you’re in for if you’re going to go through the process.

The first part, of course, should be in taking a look at what your debt load is to first determine if you have the chance to qualify for a loan.  If you’re making less money than your bills by a significant amount, don’t bother putting in for a debt consolidation loan, because not only will you not qualify, but it could result in a negative statement on your credit report.

The same goes for trying to roll your debt into a home line of credit.  The restrictions for obtaining a line of credit are tougher than getting a loan, and often mortgage companies will recommend a loan rather than giving you a line of credit.  In this case, you might not qualify for either.

If you’re making more money than your monthly debt, even 10% more, you might have a chance to obtain a debt consolidation loan.  That will reduce the amount of your payments, putting more money into your pocket, but you’ll have to make sure that you not only keep up with those payments, as penalties for missing payments can be harsh.

Once you’ve made the decision, based on the figures, that you want to go for a debt consolidation loan, you need to determine where you want to go for that loan.  It’s easy to shop online for the best interest rate, but often your best bet is going to a place where you already have some kind of record, such as the bank or credit union where you already have a checking or savings account, or wherever you make mortgage payments.  They’re usually more willing to work with you in getting something.

Next, you need to know the terms “secured” and “unsecured” or “non-secured” loans.  A secured loan means they’re going to take what your assets are and use them as a lien against your possibly missing payments or defaulting on your loan.  An unsecured loan means they’re not going to take your assets into consideration, but your interest rates and fees will be much higher.

For both of these, you may not get the amount of loan that you’re looking for, and you need to be prepared for this information.  If a loan isn’t going to take care of the worst of your issues, or your interest rates on most of your outstanding debt is lower than what a potential new creditor might offer, getting a loan to consolidate your debt doesn’t make sense.

Then it’s time to go through the grind of the paperwork, and this can not only take awhile, but it can feel invasive.  Most of us aren’t usually going around telling everyone how much our debt is and how much money we make, but you will have to answer these questions are more.

Reputable loan officers aren’t going to take any chances in giving loans to people who they feel might default on them, and they’re going to dig deep into both the numbers and your patterns.  They’re going to make you prove your income by giving them tax statements for at least two years back, sometimes four.  They’re going to ask you about your jewelry, furniture, and other things within your household.  They’re going to ask your permission to take a look at your credit report.  If you go this route, you need to be ready for these types of things.

And, in the end, there’s no guarantee that you’ll even get a loan.  Be prepared for that also, especially in these tough economic times, because you might be left with only three options then: trying to work with your creditors; defaulting in payments and hurting your credit standing; declaring bankruptcy, which isn’t as easy as it used to be, but can help alleviate your present standing while hurting your credit for up to seven years.

It’s important to know not only what your debt consolidation options are, but some of the potential issues that could come up.  The process can be rough, and it might not turn out the way you’re hoping, but it could be the beginning of your financial health starting to recover and receiving financial relief.

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Debt consolidation is the process of minimizing your creditors and consolidating your debt. After consolidation, you will have less creditors (ideally one) and you should be paying less in interest each month. Your debt will likely become more manageable and easier to payoff, but it's important to remember that every successful consolidation process depends on your ability to live within your means. Thanks for stopping by to learn about consolidation and the different consolidation loans and processes that are available.