When your debt begins to pile up, you may eventually have difficulty paying it off. Before your debt gets out of hand and forces you to default on your loans, you should explore ways to solve your debt crisis, such as a debt consolidation loan.
Use a Debt Consolidation Calculator
The next step before applying for a debt consolidation loan is to use an online calculator. Online lending platforms, such as Canstar or Lendi, provide these calculators to help you estimate your potential savings with debt consolidation.
To find out how much extra cash flow you can get from a debt consolidation loan, you will need to submit the amount remaining on your existing home loan and your total debts. The calculator will then estimate your new minimum repayments and your potential savings.
What is a Debt Consolidation Loan?
A debt consolidation loan is a type of loan that combines your existing home loan with your debts, resulting in a single loan with a favourable interest rate.
Unsecured debts often have much higher interest rates compared to home loans. If you have been completing your loan payments on time, you may qualify for lower interest rates, allowing you to save money on the interest from your existing debts.
While a debt consolidation loan is a great way to bundle your debt, there are several details to consider before applying for one of these loans. As this report mentions, Australians are often in the dark when it comes to criteria and rates of debt consolidation.
Prove You Have Stable Income
When applying for a debt consolidation loan, lenders look at many of the same details that they use when assessing your risk for a home loan. This includes your income and employment history.
Lenders want to ensure that you will continue to pay your monthly repayments on your debt consolidation loan and that you have the income to complete these payments.
You may need to prove your income and employment history before qualifying for the loan. Typically, this may require you to provide bank statements or tax records to verify your employment and your average income. In most cases, lenders want to establish two-years of employment history.
Repay Your Loans on Time
Your chances of getting favourable terms for a debt consolidation loan are lower if you wait until you already have difficulty paying your debts. As with your income, lenders want to assess your risk by looking at your history of repaying previous loans and debts.
The goal is to consolidate before your debt gets out of hand and you end up defaulting on your loans. If possible, ensure that you are paying your loans on time.
The bottom line is that lenders want to determine whether you are a trustworthy borrower. A lack of stable income, not paying your loans on time, and bad credit can limit your chances of getting your loan approved or getting reasonable interest rates.
Speak with a Home Loan Specialist
If you are still worried about whether you can get approved for a debt consolidation loan, you can speak with a home loan specialist such as Lendi or Canstar. These specialists can help review your information and provide advice on your loan. The Government also have details which may help.