4 Questions to ask yourself before applying for a debt consolidation loan
Choosing to go through the process of debt consolidation is a good way to get out of debt while paying less interest, but this type of loan isn’t the best choice for everyone. If you’re thinking about applying for a debt consolidation loan, ask yourself these questions first.
Questions to Consider before getting a Debt Consolidation Loan
- What do I want to get out of this loan? Some people need a way to lower their monthly debt bills so that they can make their minimum payments. Other people want to get their debt paid off as fast as possible. Your answer to this question will determine what kind of loan you get. Your debt counselor can look for loans with the lowest possible monthly payment, but only if you tell him or her that’s what you want.
- Can I stick to a budget? Remember that as a part of the application process you’ll work with a professional debt counselor who will help you develop a budget that will work for you. As long as you stick to it, you’ll be out of debt and back on the road to saving money in a short time. If you have had issues in the past with sticking to a budget, tell your counselor about them so that you can both come up with a better plan this time.
- What debts do you want to consolidate? For most people, the answer is everything that can be consolidated, but there are exceptions. If you have debt that you are very close to paying off or debts that you might be legally able to assign to another borrower (this is common in divorce situations), make sure your debt counselor knows this upfront. It is possible to include as much or as little debt as you want, but it’s important for the counselor to know this before starting to look for a loan.
- What is my plan to not run up debt again? This will be a question that you and your debt counselor work together on, but studies have shown that people are most successful at debt consolidation when they have solid goals of what they want from their finances when they’re done paying off the loan. Develop a few savings strategies to make sure that this loan is your last.