A debt consolidation loan is an excellent method for consolidating high interest credit card debt into one lower interest monthly payment. But beware, if you apply for a loan and are turned down, and then apply again somewhere else, your credit score may be reduced. You increase your chances of qualifying for a debt consolidation loan by using a debt consolidation loan calculator, and by following these steps:
First, do your homework. Make a list of every debt you want to consolidate. You want to be prepared when you meet with the loan officer.
Second, make up a monthly budget, so you know exactly how much you can afford to pay each month on your debt consolidation loan.
Being prepared is essential. Bring your most recent pay stub and last year's tax return with you when you apply for your loan. By being prepared, you demonstrate to the lender than you are responsible, and that increases your chances of getting the loan.
Next, understand how the math works. Most lenders calculate your Gross Debt Service Ratio (GDSR), which is a way for them to determine whether or not you can afford to repay your loan. They start by adding up all of your existing debt payments, such as mortgage and car loan payments. Then they add in the amount you will be paying on your new debt consolidation loan. They then divide that amount by your monthly income to determine your Gross Debt Service Ratio.
For example, if you pay $1,000 per month on your mortgage and $500 on your car loan, and your debt consolidation loan payments will be $500 per month, your total debt payments are $2,000 per month. If your income is $4,000 per month, you have a Gross Debt Service Ratio of 50%. Most lenders like to see a GDSR of 35% or less, so in this example you would probably not qualify for a debt consolidation loan.
How do you know how much your payments will be each month? There are a number of free debt consolidation loan calculators available on the internet, so use one to do your homework before you apply. By being prepared and understanding the math you increase your chances of qualifying for a debt consolidation loan.
Bernard Johnson has many years experience advising people on debt consolidation loans. Visit http://www.debt-consolidation-loans-information.com/debt-consolidation-calculators.htm for a free debt consolidation loan calculator, and visit http://debt-consolidation-loans-information.com/blog/ for more information about debt consolidation loans.
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