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What Is a Debt Consolidation Loan—Should You Consider One?

Going into debt can happen to anyone. It can also occur for a variety of reasons. From college students to newly divorced individuals, debt just happens. But, for many, the ability to repay often becomes too much. The stress of going more than you're able to pay can be crippling. The good news is that there are options out there to make debt repayment easier. One of these solutions is with a debt consolidation loan. But, what exactly is this type of loan, and when is it a good choice to consider?

A Personal Loan with Promise

Just like many other loans, a debt consolidation loan will have a few requirements in order to obtain one. The biggest factor to consider is your credit score. A debt consolidation loan comes from a lender or financial institution. Lenders look for your ability to repay the loan, just as any other creditors. Most debt consolidation companies will look for a 650 credit score. This isn't set in stone, but you'll find that it's easier to be approved the higher your credit score is.

Paying Off High-Interest First

The purpose of obtaining a debt consolidation loan is to pay off high-interest debt, typically credit cards. However, debt consolidation loans aren't specifically for credit cards. It can be used to pay off medical bills, car title loans, student loans debt, etc. The goal for debt consolidation is to drop your monthly payment or take all of the money owed and put it into one manageable payment each month.

For example, if you had six outstanding credit cards, you could take out a debt consolidation loan to pay off all the balances. You would then be left with one payment every month. There would also be a fixed interest rate based on the consolidation loan versus the interest rate of the credit cards.

Is It Right For You?

There are several methods for getting and staying out of debt. Those consolidation loans are perfect for individuals that have a higher credit rating and desire an easier way to pay off their debts. A consolidation loan is also an excellent choice to get rid of extremely high-interest rate credit card balances. Before taking out a debt consolidation loan, talking with a financial counselor about debt management solutions is a great first step.

Consolidation Resource is proud to offer consumers excellent tools and programs for debt management. Since 2012, we've been inviting consumers to learn more about debt consolidation loans, debt settlement programs, and credit counseling. To learn more about how you can get and stay out of debt, visit Debtconsolidation.com