The best debt consolidation rate is the lowest rate you can get from a lender. Debt consolidation is borrowing enough money to combine your debts into one. Dealing with a single loan is easier than juggling multiple loans. The first step toward getting the best deal is to shop around for a lender with the lowest interest rate. Don’t just rely on the lender you’ve established a strong relationship with. You might miss some good deals out there.
Financial institutions charge different rates on consolidation loans. These rates vary widely, ranging from 5% up to 36%. it is wise to go for a consolidation loan only if the rate is lower than the combined rate you are currently paying. A consolidation loan should give you some relief, not add to your burden or leave you in the same state.
Improving Your Credit Rating
One of the best ways to get a good deal from a lender is to have a good credit standing. A good credit score will help you get a consolidation loan at a reasonable rate and also open for you ways to get other cheaper loans from an online lender, credit union, or bank.
You should aim at a credit score of not less than 740, this is a good strategy for getting debt consolidation loans at low-interest rates. As your credit score gets lower, the interest rate will increase. If your credit score falls below 660, then be prepared for higher interest rates. That said if the combined interest rate charged on your current loans is higher than that you’d be charged on a consolidation loan, then go for the loan. An expert from Bank of America mortgage can help you calculate these rates and advise accordingly.
How To Improve Your Credit Score
The following tips can help you improve your credit score:
- Check your credit report for any mistakes and have them corrected. Some of these mistakes could be causing your poor rating.
- Avoid signing up for any new cards when you are heavy in debt.
- The balances on your credit cards should not be more than 30 percent of your credit limit
- Don’t miss your loan repayments. You can set up automatic repayments
- If possible, pay your balances monthly, or try to make some payments, not less than the minimum payment
- Pay our bills on time
Steps To Get The Best Debt Consolidation Rate
Apart from the tips given above, there are many other steps you take to ensure you get a consolidation loan at a friendly rate. You can do the following:
- Choose a fixed-interest rate consolidation loan. Variable interest consolidation loans can add to your trouble because they add to the total loan cost.
- Understand your financial situation so if the lender asks why you are borrowing, you can explain yourself. Also, be specific on the amount you want to borrow.
- Before you start the application process make sure you have all the required documents, including either tax returns or pay stubs, proof of your income, social security card, proof of your address, your identification, among others. Find out what documents your lender needs. You can visit your lender or get the information online.
As stated earlier, a consolidation loan should help relieve your burden and not add to your troubles. So it’s best to understand all the loan terms before you sign any agreements. Feel free to ask your lender questions to seek clarification. Find out about all the fees associated with the loan, including origination fees, early termination fees, among others.
If you are unable to go through all these on your own, don’t hesitate to consult a financial advisor. That’s how to get the best debt consolidation interest rate. The expert will also help you identify the various options available for you.