Do You Qualify For Debt Consolidation?

People with a heavy burden of debt may wish to opt for debt consolidation instead of debt settlement to get rid of multiple creditor payments and harrassment calls from the creditors but before you make up your mind for opting debt consolidation, stop and think because debt consolidation does not work for every one, as most people might not qualify for debt consolidation.

Debt consolidation involves a bigger unsecured loan to repay the smaller multiple loans and then make one payment towards repaying the debt consolidation loan. You can opt for a debt consolidation loan or a secured home equity loan against a collateral if you donot qualify for an unsecured debt consolidation loan. These are the major things you need to keep in mind for debt consolidation:

1.You need to have a good credit score to qualify for a debt consolidation loan, which is next to impossible for most people in debt.

2.Even if you qualify for a debt consolidation loan it will have to be large enough to cover all your present outstanding debts for an effective debt consolidation which is hard to get approved with a bad credit history and unstable income source as it is an unsecured loan.

3.You need to make enough money every month to meet the lending standards. Even if your income is high enough, the lender may count your current debt load against you, even though youre planning to use the loan to pay off your debt.

4.If you donot qualify for an unsecured debt consolidation loan you may qualify for a home equity loan or second mortgage which is a secured loan against a collateral which again needs you to be a house owner and probably have enough equity to borrow against in order to consolidate your debt. It is comparatively easier to qualify for this loan than debt consolidation loan since the credit score requirements are not that strict and as it is a secured loan where the lender can easily have a foreclosure if you fall back on the payments, hence it is risky too.

Debt consolidation is good if you get a large debt consolidation loan with a lower interest than what you are currently paying on your existing debts. If you are opting for a home equity loan then it involves possibily of losing your home if you are unable to make timely payments.

In these cases debt settlement may be of much help where debt consolidation seems to be ineffective. Debt settlement now with FTC guidelines is effective in giving you fast and convenient debt relief.

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Article Originally Published On: http://www.articlesnatch.com

Tags: Debt Consolidation

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