There are many online lenders that offer to lend you money via an online application with no branch visits. They often will deposit the funds in your account the very next day. With many options available, it is important to understand the common traps that can be avoided in debt consolidation.
Acknowledge the root of the problem – Consolidating your debt will help you pay off debts on things like credit cards which will charge you higher interests. After you pay your debts, you will have to make sure you control your spending so that you don’t accumulate more debt. Therefore it is best to understand why you have gotten into debt in the first place before applying for a loan.
You’re consolidating the wrong debts – When you apply for your loan, you may be tempted to request for the highest amount that you can get approval for. Firstly start with looking at the interest rates that affect each account. Avoid settling your low-interest-rate credit cards, as this may mean that you end up paying more.
Make sure lenders are pulling a soft inquiry – Make sure your inquiry is a soft inquiry, as this will not affect your credit score. While a hard inquiry will be seen by the lenders and will affect your credit score.
Carefully review the contract – Read through the terms of your consolidation loan, so that you know if you will be charged origination fees and or a pre-payment penalty.