DIY Steps to Get a Debt Consolidation Loan Application Approved

A debt consolidation loan is a loan that you take so as to pay off your accrued debts and loans. You may be wondering why you need to take a loan to pay off another loan. Simple; the consolidation loan provides a means for you to manage your debts because, once the loan is approved, you will have a single loan to service rather than the current multiple.

A big number of debts adds financial burden to your shoulders and it could be tough leading a comfortable life when you use your income to pay off debt then get into more debt to get by. Unfortunately, this is the situation with many people and this has resulted in the high consumer debt in the country.

A consolidation loan provides relief from creditors who pester you for non-payments. The loan is also an effective solution if you keep forgetting to repay all your bills and loans ending up with high late fees and penalties. However, it is important to note that this debt management process should only be pursued when one is certain that they are going to change their lifestyle to prevent accumulation of more debt.

If you are true to yourself and willing to cut down expenses on credit management consultancy, you are capable of taking the debt consolidation bull by the horns yourself.

Here are the main steps to a DIY debt consolidation process:

  1. Prioritize your debt

The first step to debt freedom is facing the problem head on. You have to know who you owe and how much they are owed. To do this, you should prepare a list of all your creditors. The best way to do this is to set up two columns in an Excel spreadsheet then list all your creditors and the amount you owe each one of them.

To do this well, calculate the total amount you owe including any fees or transaction charges plus the interest rate. There are many resources online to help you calculate loans or debt owed. Look up loan amortization calculators and general consolidation loan calculators to get the exact amount owed to creditors. Creditors aren’t very forgiving and you should have the exact digits to the cents.

Once you have the accurate figures, sort your creditors list in order of priority. By prioritizing and noting the creditor you owe the most, you will be able to visualize the seriousness of the problem and create stronger strategies.

  1. Get your credit score information

You will get lower interest rates on a debt consolidation loan if you have a good credit rating. Contact the relevant financial bodies for your credit history. While at it, verify the details in your credit history.

  1. Create a budget and calculate affordability

If you have one source of income, then you know exactly how much you have to spend. Having different sources of fluctuating income could be a challenge but still an important facet in planning.

To create a reasonable budget, stick to your Excel spreadsheet. Put down your total income against the debts above and all the utility and other living expenses. You will find that you have a negative balance but this is how you know just how much you owe and how much change is needed.

To create a more strategic budget, you should gather all your receipts and bank statements. Use these to know how you spend your money and how not to. You may find that you earn enough but you have many unexplained and unreasonable expenses. Cut these out of your budget.  Find expenses that can be cut down. These will affect your lifestyle, but to lead a debt free life, such steps are crucial.

Once you have set these out, determine your debt repayment strategy. By saving using the watertight budget, you will find that you have extra money and you can pay a creditor more than you already do. How much can you afford now?

You should also calculate how much money you need to raise through the consolidation loan in order to repay all debts fully.

  1. Negotiate

With a detailed plan on which debts you afford, you should be able to contact the creditors you have decided to pay first. Note that your creditor could have sold your debt to a collection agency and you may have to follow them up.

How to contact your creditors

  • By now you have a contact list with a priority list for whom to contact first and last.
  • Contact the creditor by phone, email, or letter. Whatever your means of communication, you should be polite even when the creditor is rude.
  • Inform the creditor your reason for contacting them then give them details of your debt. Give reasons for being behind on the loan payment, your current income and obligations, your financial plan to get out of debt, and the amount you can afford to pay monthly. It is prudent to inform the creditor of all debts and creditors.
  • Ask for your account details to verify your debt account status.
  • Show them your budget and present the offer you have for them. Inform them that the offer will be implemented under a debt consolidation process. Note that complete honesty is important whether you are dealing with a creditor directly or a collection agency.

A debt consolidation company should only come in to the table in creditor negotiations when all your efforts fail. You should also negotiate with the debt consolidation company for a favorable rate on the loan.

  1. Debt validation

Your credit could have been turned over to the collection agency. Contact them and ask them to validate the loan before you start repayments.

  1. Apply for the loan

With all your financial details at hand, your debt consolidation loan application should be approved within a short time.

  1. Consolidating credit card debt

If you need to consolidate your credit card debts, talk to the credit card company and ask for a balance transfer consolidation. This is an affordable debt management system for the high interest credit cards. Interest rates account for expensive loans and if the interest rate is lowered, you will be able to pay more monthly reducing your debt.

In conclusion, to get a debt consolidation loan, these steps will help. They will also help save money. Negotiating with creditors shows your genuineness and it helps in getting an affordable loan eventually.