How to Consolidate a Loan Without Collateral


The concept of a debt consolidation loan is simple: an applicant applies for a loan to cover the costs of his existing bills, e.g., credit card bills, medical expenses and payday loans, and repays the loan at a better rate and over a longer period of time. To minimize risks, many lenders require collateral. It is not impossible to obtain a debt consolidation loan without collateral, but you must meet all the requirements set forth by the lender.

  • Purchase a copy of your credit file and score before applying for a loan consolidation. The major credit bureaus -- TransUnion, Experian and Equifax -- offer a variety of credit report products and services for fees ranging from $10 to $40, as of 2011.

  • Review the number and severity of the potentially negative items currently documented on your credit file, such as delinquent payments to creditors and unpaid collections accounts.

  • Contact a debt counselor or lender specializing in no-collateral loan consolidation. Discuss your credit file and score -- the counselor may request a copy of your credit file to verify eligibility. Ask if you qualify for a no-collateral loan consolidation and inquire about the terms and conditions of the loan.

  • Check that you have an acceptable amount of debt. Debt consolidation loans are sometimes subject to minimum and maximum debt amount. Frequently, debt within the $5,000 to $15,000 range is acceptable. Calculate your debt total by adding the amount owed on each account.

  • Apply with a co-signer if your credit file, score and total debt disqualify you from applying on your own. Choose a co-signer with good to excellent credit. Inform the co-signer that by signing the loan agreement he assumes equal responsibility for the consolidation loan and must repay the total loan amount if you should default.

Tips & Warnings

  • Request a copy of your free annual credit file, without score, if you have not already. Visit Annual Credit Report's website for details.
  • Frequently, lenders prefer an applicants to secure a debt consolidation loan with collateral, such as real estate.

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