Debt consolidation is a great way to refinance your debts, and get hold of your financially softening backbone once again. Missing loan payments once or a few times may cause you to lose confidence in yourself, your system, your business, and your abilities. This history of bad debt management may tag you too badly in the market, and it might make it hard for you to get approved for a loan in the future. Maintaining a healthy credit rating and having a good reputation as a debtor are really important to sustain in the competitive business environment. Hence, if you ever get into the risk of ruining your reputation or getting into bad debts, high interest business loans, and too much of credit card debts, you should consider debt consolidation as a viable solution.
How can you get relief through a consolidated loan?
If you have taken up a number of loans from multiple lenders, you have to bear the stress of dealing with creditor calls and penalties for losing payments. A consolidated loan or debt consolidation loan can save you from this. You can consolidate all your debts by taking a large loan to pay off the smaller ones. Debt consolidation companies are responsible for getting you the large sum and overseeing the whole process. You should consider consolidating the high risk loans that you are having a hard time to repay.
Small or medium sized businesses often don’t have a choice but to take up loans to meet funding needs or financial obligations. Sometimes the situation calls for immediate financial support, and you end up taking a high interest loan that causes more problems in the future. Too much of debt and multiple accounts get you torn between the various responsibilities. Often you get calls from various creditors, and you fail to hold your mental sanity when you are perplexed with the debt management.
The easy way out that makes things bearable, better, and easier on your pockets is to get a consolidation loan. This is a simple process. You apply for debt consolidation, and when you are approved, you get a lump sum amount to pay off all existing debts which includes the debts, the pre-closure penalty charges, processing charges if any etc. However, there are a few things to check to see if you really qualify for a consolidated business loan.
Did you check your credit score?
Credit rating or score is one very serious point that decides if you at all qualify for a new consolidated loan or not. The consolidation company will be taking a great risk for you by closing all your loans which you could not possibly pay on time. Hence, you need a healthy credit score to prove that you are a good candidate even today to get this new loan. To prepare for this part, you may ask to check your credit history and score from a financial assisting company, and get help to work on it.
Do you know how much debt you are in?
To apply for a loan, you must know how much debt you are in. Your debt is not the amount you owe to your multiple creditors each month. Rather it is a complex calculation which involves the exact loan amount you took, summed up with total interest through the loan tenure to be paid, with the pre-closure charges which many company will impose on you, and with that some hidden processing fees, and some penalties that you got for late payments on previous EMIs. Thus, it’s a long calculation, and you need to give in time here to get the exact amount you need from the new consolidated loan.
Do you know all about consolidated loans?
Don’t leave any stone unturned when you are researching about consolidated loans or your options. Do you know all that you need to about a consolidated business loan? There may be loopholes, conditions, and many catches which your consolidated loan agent still did not disclose. Hence, a thorough research is much needed so that you do not leave one mess only to land in another even bigger mess!
Did your application get rejected?
If you have already applied for a consolidated loan, and your initial one or two applications got rejected, then it’s high time you take a break from applying further, and investigate into your profile to see what could be the reason for rejection. A rejection affects the credit history negatively, and hence rejections must be avoided.
When you start applying, make sure you apply to only one reputed consolidation company that won’t reject an application just like that, and would consider your situation in the light of the fact that you are applying for a loan consolidation only when you are entangled in the bad and unmanageable debts.
Pay off the bad debts
You apply for a consolidated loan to pay off all your current debts. However, you may not get approved for the full sum that you originally applied for. If you get a lesser amount, there is no reason to get disappointed. That’s because you can still manage the chunk of the unmanageable bad debts with the new loan amount by paying off those loans which are not comfortable to handle.
Not all loans are bad and some are obtained at low or reasonable rates of interest too. If you have a few manageable loans amongst the many, you may leave them aside, and focus only on the high interest ones with the consolidated loan amount. After you get your consolidated business loan approved, and you start paying the new single EMI, take great care to maintain the timely repayments, and this will help you recover the credit score and reputation in the longer run.
Author Bio: Isabella Rossellini is one of the financial advisors and is a freelancer consultant. Earlier she worked with some great consolidation companies and she is now using those experiences in helping his customers.
