Before you apply for a debt consolidation loan, do two things.
First, prepare a monthly budget showing your monthly income and expenses.
Second, draw up a complete list of your current debts to determine the total amount of your outstanding debt. Be honest and don’t leave anything out. The loan officer will be reviewing your credit file, so honesty is the best policy.
Next, read all loan documents carefully. If the interest rate offered by your financial institution seems too high, don’t hesitate to shop around at other financial institutions to try to negotiate a better rate. However, your credit score will be reduced if you apply at numerous places in a short period of time, so do not apply at more than three different banks.
In most cases, once the loan has been granted, the bank will pay off the outstanding debts to your creditors. Your financial institution may close credit accounts you have with stores, businesses or credit card issuers to make sure that you don’t increase your debts while paying off the consolidation loan. Even if they don’t close your other accounts, cut up your credit cards to ensure that you don’t get into debt again.
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