How to Get a Debt Consolidation Loan if You Do Not Own Property

Many people find themselves weighed down by credit card and other debt that becomes extremely difficult to manage. Before things get out of hand and ruin your credit rating, obtaining a debt consolidation loan may be the answer. However, not everyone who needs to combine debt in order to meet existing obligations owns a home or other property that can stand as collateral. Fortunately, it is possible to apply for and receive what is known as an unsecured debt consolidation loan. If you need to consolidate your debt and do not own property, here is what you need to do.

Difficulty: Moderate

Instructions

1. Total all the current debt obligations that you wish to consolidate. Knowing exactly how much you owe will help to put things in perspective. Also, there is usually a limited amount of cash that lenders are willing to extend when there is no property available to secure the loan.

2. Check the current status of your debts. Successfully earning approval for an unsecured consolidation loan will be much easier if you are not in arrears on any of your credit cards and other accounts. Use whatever means necessary to keep your debts current as you look for an institution to finance the debt consolidation.

3. Obtain copies of your credit report from all three of the main credit bureaus. Many lenders who write unsecured loans will rely heavily on your credit history as they make a decision of whether or not to approve your loan application. Since you have no idea which of the credit bureaus they will use to secure your credit history, make sure there are no errors or misrepresentations on any of the reports before you start submitting applications.

4. Talk with your local banker. Your first stop in your search for a debt consolidation loan should be with an institution that already has a history with you. If your bank does not write unsecured consolidation loans, ask for recommendations of other local institutions that you can investigate.

5. Check into other banks and finance companies in your area. Even if your bank does write debt consolidation loans, it never hurts to compare the terms with other possibilities. While you will pay a higher rate of interest for an unsecured loan in many situations, you may find that a finance company will charge a lower interest rate than your bank and also possibly offer more liberal repayment terms. Go for the option that offers the best fit for your current financial situation.

Tips & Warnings

• A lower rate of interest is a compelling reason to go with a particular lender, but it is not the only important factor. You also want to make sure the monthly payment is well within your means. If money is really tight, it may be smart to go with a loan that has a longer duration and charges a little more interest, just so you can have a lower monthly obligation.
• Once you have paid off your debts and only have the monthly consolidation loan payment to manage, do not allow yourself to run up additional debt. If that means cutting up your credit cards and not using the accounts except in an extreme emergency, do so. While it may be difficult to resist the urge at first, you will adjust to the situation and have the satisfaction of watching your overall debt shrink a little more each month.