Will a Debt Consolidation Loan Improve My Credit Score

Your credit score is a combination of many factors, including your job history, income, and how long you have lived at your current address.  Those factors do not change when you get a debt consolidation loan, so for those factors a loan will make no difference on your credit report.

A more important factor would be your total level of debt, and again a debt consolidation loan has no impact on your total level of debt.  If you owe $5,000 on four credit cards for a total of $20,000, and you get a debt consolidation loan for $20,000 to pay off your credit cards, your total debt level remains unchanged.

However, there is one area where a debt consolidation loan may help your credit score, and that is in the area of your debt service costs.  If your four credit cards have an interest rate of 19%, and you can consolidate with a loan at an interest rate of 10%, your debt service ratio will improve.

Finally, by successfully qualifying for a loan your credit score may improve slightly.

Ultimately taking on more debt will not improve your credit score if you already have too much debt, so in most cases paying down debt is a better solution.

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Can a Debt Consolidation Loan Help Me Avoid Bankruptcy?

The short answer is yes, a debt consolidation loan may help you avoid bankruptcy in Canada, or anywhere else. Here’s why:

If you qualify for a debt consolidation loan (and there are ways to increase your chances of qualifying for a debt consolidation loan), then you will probably pay a lower interest rate.

With a lower interest rate, even if your monthly payments are the same, more of your monthly payment will go towards principal, and less will go towards interest, so you will get your debts paid off years faster.

Use our free, on-line debt consolidation loan calculator to determine what your monthly payments are likely to be. If the numbers look reasonable, a debt consolidation loan may be the solution to your debt problems, and you may be able to avoid bankruptcy.

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Debt Consolidation Loan Calculator

You have some high interest debts, like credit cards, so you decide to lower the interest you are paying by getting a debt consolidation loan. But before you go to the bank, you want to know whether or not you will qualify for a debt consolidation loan.

To qualify, you will need to have the income to repay the loan. The larger the loan, the more income you will need to qualify.

Here’s a quick way to find out: use our free, on-line debt consolidation loan calculator. It’s easy to use; all you need is the current total you owe on credit cards, auto loans, and other debts. It also helps to know the interest rate you are currently paying, so that you can see how much money you will save.

You then enter the amount you wish to borrow, and the interest rate you expect to pay, and instantly you will know whether or not you can afford the debt consolidation loan.

Knowledge is power: you don’t want to go to the bank and get turned down for your loan. If it looks like you won’t qualify, it might be wise to take some steps to increase your chances of qualifying for a debt consolidation loan.

So start now by using our our free, on-line debt consolidation loan calculator, and take that first step to reducing the interest you are paying by getting a debt consolidation loan.

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Debt Settlement Myths

Is Debt Settlement a better option than a debt consolidation loan? Perhaps, but there are some debt settlement myths to be aware of:

1. Debt settlement doesn’t hurt score – Unfortunately debt settlement will give you a lower credit score than you would get with perfect credit.

2. All creditors agree to debt settlement – Most creditors may agree, but they are not legally bound to accept any offer.

3. Debt settlement companies are helpful – Some are, some aren’t. Generally they will only put in effort if they are being paid.

4. Money sent to the debt settlement company is safe – Not necessarily; there are many debt settlement scams.

5. Debt settlement is going to eliminate debt in 12 months – There is no fixed time; it will depend on how much you pay, and how quickly you pay it.

More information can be found in our article on Debt Settlement Myths.

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Do I Qualify for a Debt Consolidation Loan?

Before you apply for a debt consolidation loan, you want to ask yourself the most basic question: Do I qualify for a debt consolidation loan? The answer will depend on four factors:

First, what is your income? The lender must assess your ability to repay the loan. If you are not working, or if you have low income, you probably won’t qualify for a debt consolidation loan.

Second, how much do you want to borrow? Obviously it is easier to qualify for a $10,000 loan than for a $100,000 loan. The more you want to borrow, the higher your income will need to be.

Third, do you have any security or collateral for the loan? If you want to borrow $200,000, and you have a house worth $400,000, it will enhance your chances of qualifying for a mortgage debt consolidation loan. If you don’t own a home, or if your home has no equity, you won’t qualify.

Finally, what’s on your credit report? If you have bad credit, it’s unlikely you will qualify.

To find out more, try our free debt consolidation loans calculator to see if you qualify.

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Don’t Use a Debt Consultant to Get a Debt Consolidation Loan

It is very tempting to hire a “professional” to help you get a debt consolidation loan. In most cases that’s not necessary. You can go to the bank yourself, and bring proof of your income and a list of your debts, and qualify for a loan without any help.

Debt and credit consultants often promise to help you deal with your debts, and even pay off your debts for only a few cents on the dollar. They will offer a debt settlement program, which they will tell you is better than a debt consolidation loan, to repay your debts faster.

It sounds like a good deal, but often debt consultants are scams, and they are not a good alternative to a debt consolidation loan.

They will charge a large fee, up front, and then they accumulate money until they have enough to propose a settlement. Unfortunately that can take many months, or even years, before they have enough to make a settlement. While you are waiting for the settlement to happen the creditors will still be calling you, and they may even sue you.

You have options, including a debt consolidation loan, a Chapter 13 Wage Earner Plan, and a consumer proposal. You can even file bankruptcy in Canada, or Chapter 7 Bankruptcy in the USA. Consult an expert today and review your options.

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Can a Debt Consolidation Loan Help Me With High Credit Card Interest Rates?

High interest rates on credit cards are becoming a serious problems. When the economy goes bad, credit card companies do more detailed regular credit checks on their customers, and at the first sign of trouble they will often raise the interest rates without warning.

That’s a big shock: everything was going well, and you were managing to meet your payments at 11% interest, and then all of a sudden the interest rate jumps to 22%, and you can’t even afford the minimum payments. What should you do?

First, talk to your credit card company. Perhaps they will agree to lower your interest rate, or convert your card into a loan with fixed terms of repayment, at a lower interest rate.

Second, talk to your bank about getting a debt consolidation loan. Use our free debt consolidation loan calculator to determine how much you can save.

Finally, if that doesn’t work, you may need to consider a consumer proposal as a way to consolidate your debts. You have options, so review your options now to keep your interest rates low.

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Beware of turning an unsecured loan into a secured debt consolidation loan

A debt consolidation loan is a great way to reduce your costs of borrowing. If you can arrange a line of credit or loan at the bank at a low interest rate, and use that money to repay your high interest credit cards, a debt consolidation loan is a great way to save on the interest you are paying, and help you get out of debt faster.

In most cases the cheapest possible interest rate is on a secured loan, such as a mortgage. The bank or mortgage lender knows that if you don’t pay they can take your house. They are “secured”, so they have less risk, so they are willing to give you a cheaper interest rate.

That’s why many people arrange for a mortgage debt consolidation loan or a home equity debt consolidation loan to repay lower their cost of borrowing.

Beware! By getting a secured loan, you have now put a charge against your house. If you don’t make your loan payments, you will lose your house! A secured loan is a great way to reduce your interest costs, but only get a secured loan if you are absolutely certain that you will be able to make all required payments.

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Is it Possible to Become Debt Free?

Yes, it is possible to become debt free. A debt consolidation loan is one way to repay your debts over a period of time. But there are other options.

This debt consolidation loans information site was created to provide information about debt consolidation loans, and other alternatives for dealing with debt. That’s why we include a free debt consolidation loan calculator. Every day our editors receive e-mails and comments with suggestions. We research all of them, and we constantly keep our eyes open for new and better ways to deal with debts.

During our research we discovered the remarkable story of Clint Holland.

He discovered that it is possible to become debt free without filing for bankruptcy, or sneaking out of paying your bills, or living on macaroni and cheese for the next 5 years, or doing anything illegal or immoral. Here is a remarkable story:

My name is Clint Holland and the first thing you should know about me is I am not a credit expert or some kind of financial egghead. I’m just an ordinary, average guy that ended up deep in $213,000 of debt and found a 100% guaranteed and proven way to get out faster than any method currently taught. Plus, it works regardless of where you live and is not dependent upon your income. Not long ago …

I was scared I was going to lose one of my cars or my home. Things were tight and times were tough money wise. The pressure was eating away at my health and it took its toll on my family. I was convinced I had to do something to get this monkey off our back. As you can imagine …

I was buying all sorts of books and courses that promised me a way to get out of debt, but most of it was junk or stuff that was too hard to do. Some of it was good. Anyways, I ended up stumbling upon a ridiculously simple technique one day that came from a military strategy concept – and so I tried it on my mountain of debt. Guess what?

It worked!

I know this sounds crazy, but with your permission I’ll prove it’s 100% true. It’s so true that I became free from that terrible $213,000 mountain of debt in just 5 years! And let me tell you, life is good now. No more creditors calling me or mailing me nasty letters to pay my bills. Plus, I have more spending money to do what I want, when I want. And you know what?

I didn’t go out and get a second job or increase my income to do it. I didn’t even get a loan or any other such nonsense you’re commonly told to do.

And yet, my system is guaranteed to make you 100% debt free faster than anything on the market. That includes your mortgage, credit card, automobiles – whatever!

There are options, so research your options today!

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Debt Consolidation Loans in a Recession

The entire world is in a recession. The credit crisis of 2008 has led to reduced credit in 2009, and on into 2010. Banks lost money, so now they don’t want to make any new debt consolidation loans unless the borrower has perfect credit. Of course if you had perfect credit, you would not need a debt consolidation loan!

Is it possible to get a consolidation loan in these difficult times? Yes, it is, but you need to be smart and work a little extra hard.

First, be prepared. Before you go to the bank, get copies of last year’s tax return, recent pay stubs, and statements from all of the credit cards and other debts you want to consolidate.

Next, check your credit report to make sure it’s correct. If there are errors, get them corrected before you apply for your loan.

Third, ask your friends where they have recently obtained loans. They may be able to refer you to a specific loan officer who will be easier to deal with.

By taking these simple steps you are more likely to be successful. If you don’t get the loan, ask what you need to qualify again in the future. Perhaps if your income is a bit higher, or if you have a co-signer, you are more likely to qualify.

Good luck!

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