Applying for a debt consolidation loan is a good idea if you want to pay your debt faster and in a simpler way. It will also save you an important amount of money on fees and interest. There are three main possibilities to consolidate secured and unsecured debts: personal loan, home equity or going to a debt consolidation company. Each possibility has its advantages and disadvantages, and you will have to choose the option that will benefit your particular case the most.
However, whether you qualify or not for this kind of loan depends on several factors. There are a number of requirements that you have to meet, in order for your application to be successful.
Here are five factors that will influence the decision of the creditor:
• Your income – It is very important for the creditor to know that you have a stable and constant income, consistent enough to allow you to make the necessary payments comfortably. Some creditors require a certain debt to income ratio. Your chances of getting the loan will be bigger if your monthly disposable income is of over 10% of your gross income.
• Your payment history – The creditor is interested in seeing how you have managed your previous debts, especially whether or not you have made your payments on time. A bad payment history might mean higher interest rates or even denial of application.
• Stability – In the eyes of a creditor, stability means living in the same place for at least two years. This shows that you are reliable and able to commit. If you own the place, your chances of securing debt consolidation loans are even brighter (http://www.toptenreviews.com/money/debt/best-debt-consolidation-companies/).
• Homeownership – Being a homeowner is not a must in securing a loan, but it will certainly make it easier to get approved. The security that your property offers to lenders will make them relax their terms a bit.
• Equity – Equity is not a must either, but, without it, you will only be able to consolidate a small amount. Creditors are not comfortable with lending considerable amounts of money without a collateral. So how much equity you should have? Here is an example, so that you can compare it to your particular case: $35,000 of equity in your property will allow you to consolidate $30,000 of debt with no problems.
Consult with a specialist and see which debt consolidation option suits you best!