Qualifying for Debt Consolidation Loans California
Many Californians have multiple debts that they have to pay each month. Despite making their payments, it may seem as if paying off all of the debts is impossible. One possible solution to becoming debt free is obtaining a debt consolidation loan in California.
Debt consolidation loans can help people who have debts roll multiple loans and accounts into a single loan that often has a lower interest rate. They are then able to make a single payment to the lender each month rather than making multiple payments to the individual creditors for which the loan has been taken out. Getting a debt consolidation loan might help you to pay off your debts much faster than if you continue to make your minimum monthly payments for all of your individual debts. However, you must be able to qualify in order to be approved for a debt consolidation loan California.
Types of Debt that Qualify for Debt Consolidation Loans California
Not all types of debts qualify for debt consolidation loans. In order for your debts to qualify for one of these loans, the debts must be unsecured debts. These are debts for which nothing is held as collateral such as credit cards and medical debts. Qualifying debts do not include such things as auto loans or mortgages. If you have a significant amount of credit card and medical debt, getting a debt consolidation loan might help you to become debt-free faster since the interest rates are normally much lower for debt consolidation loans than they are for high-interest credit cards.
Who Qualifies for Debt Consolidation Loans?
In order to obtain a debt consolidation loan, you will need to have a qualifying credit score. Like other types of loans, lenders want to see that you are a good credit risk. People who have bad credit normally will not qualify for debt consolidation loans. Lenders will want to see that you have a good credit score and a history of making your payments on time. If you do have a lower credit score, any loan that you might be able to secure may have a higher interest rate.
It is also important that you are able to show that you have a steady income from your job. A lender might ask to see bank statements, paycheck stubs or tax returns to see that you have an income that is sufficient for you to be able to repay your debt consolidation loan.
Lenders may also want to see that you are financially stable. Signs of stability might include maintaining the same residence for a long period of time and having a debt-to-income ratio that is not too high. If your debts are more than 36 percent of your income, you may have a more difficult time securing a debt consolidation loan.
If you do have marks on your credit, a lender might want to see that you have some equity. Having equity to secure your loan may make lenders more secure with the fact that you will make the payments on your loan.
What to Do to Prepare to Apply for a Debt Consolidation Loan in California
If you believe that you would benefit by getting a personal debt consolidation loan, there are some things that you should do to prepare. Preparing to apply for a loan may enhance the likelihood that your application will be approved. You should start by getting copies of your credit reports from each of the three major credit reporting agencies, including TransUnion, Equifax, and Experian. Each of these agencies is required to give you a free copy of your credit report each year. You can either send for your copies by mailing requests or obtain them by going to annualcreditreport.com.
Once you have your copies of your credit reports from each of the three credit reporting agencies, read through them carefully. Highlight any information that you may find is inaccurate. You can request that the agencies fix any incorrect information that you find on your reports. Inaccurate information that the agencies are unable to verify must be removed from your credit reports after 30 days. Once you have corrected any mistakes on your credit reports, you should gather your financial documents, including your pay stubs, bank statements, and tax returns.
Applying for a debt consolidation loan is fairly straightforward. The lender that you choose will look at your credit history, income and indicators of your financial stability. If you are approved, you will receive a debt consolidation loan that you can then use to pay off your high-interest unsecured debts. You can then simply make your monthly payments on your debt consolidation loan rather than sending multiple payments to your creditors.
In order to secure a debt consolidation loan, you must meet the qualifications required by your lender. Debt consolidation loans can help you to repay your debts much faster so that you can become debt-free. These loans can be very beneficial to many people.