Debt consolidation lender is a lending institution to turn to when you have more than $10,000 in unsecured credit card debt. Perhaps you have more than $ 30,000 in secured debt such as a car and you also have your mortgage payment. This is a situation where you will need a loan to consolidate your credit card debts and other unsecured debts.
Getting a loan, with a lower interest rate, to consolidate debts is one of the best ways to make monthly payments more affordable. You will need to decide the loan that will best serve your interests based on your income, credit and equity as lenders offer various loan terms. But let’s look at how consolidation lenders work first.
How A Debt Consolidation Lender Works
A Consolidation lender evaluates your credit reports via three credit reporting agencies. If the reports show defaults, they may be reluctant to offer you a loan. However, if the reports show your effort to clear up the debts, the lenders may offer loans with high interest rates and higher mortgage payments.
The bank or lending institution will also need proof of income. Most lending institutions need up to three years of stable income to decide if you qualify for a debt consolidation loan. If there are bad points against your credit history, but you have shown effort to clear up the debts, the lenders will consider the good deeds, also considering the balance used to clear up the debts.
Secured and Unsecured Debt Consolidation Loans
The main benefit of a secured loan facility is the convenience of owing only one lending institution and the lower interest rates. In addition, interest charges on consumer loans like your home equity loan or line of credit is tax-deductible. As you put your house as collateral, however, if you fail to pay off your debt you could lose your home.
Home equity loan and home equity line of credit are two available loan options. A home equity loan is a facility where you get the proceeds of your loan lump sum. And a home equity line of credit is a facility where you have a credit line and you may opt to get funds only when you need it.
What if you don’t own a home? Don’t worry! There are unsecured loan facilities available for non-homeowner or for those who don’t want to put their houses as collateral. The downsides of these unsecured loans are their interest rates are higher than secured loans and are not tax-deductible.
So, consider getting a debt consolidation loan once you know that getting a loan to consolidate your debts will best suit your financial needs. However, remember to shop around and only work with a reputable debt consolidation lender that offers loans with favorable terms.