Shopping for a Debt Consolidation Loan

Credit Card debt can eat you alive. Those negative marks on your credit report are also affecting your future abilities to not only borrow money but to do it at reasonable interest rate levels. Any credit card debt is also a drain on your current income which could be going to better investments.

So to solve this problem most of us have to turn to a Debt Consilidation Loan.

Don't let the name scare you, a debt consolidation loan can be yours in three easy steps, sometimes regardless of your credit score.

1. Call the Loan Department or Loan Officer at several financial institutions in your area. (i.e. Local and Regional Banks, Credit Unions) State that you are interested in obtaining a loan for the purpose of debt consolidation. Some Banks will refer you to personal lines of credit.

Most of the banks you speak to will charge different rates and have different requiments for writing the loan. Most Credit Unions offer lower rates but require you to be a "member", meaning you need to open a savings, or "shareholder", account with them at the minimum.

If you find that any institution you call can't help, don't be afraid to ask who they think might be able to offer a loan of the type you are looking for.

2. Determine what the difference is between the interest rate on the loan and your current debt interest charges. For instance, depending on your debt level, a Debt Consolidation Loan with an annual interest rate of 12% far out weighs the 17% some people are paying on their credit cards. That's also before figuring in any annual fees your cards may charge.

3. Your Credit Rating will affect your ability to borrow and in some cases how much interest you will pay. Because of my bad credit rating, which I was trying to improve, my lender hesitated opening a personal line of credit in my name. To add insult to injury they wouldn't even consider anything over a third of the amount I had requested.

A technique which worked very well for me was to put my money in a CD and use that as the basis for a secured loan. This did not even require the lending institution to check my credit report. Also as an added benifit the interest rate charged was only 3% above what the CD was earning. This effectively allows you to cut any credit card debt from 17% down to 3%.

The keys to making this work though are having the necesary funds to put away in a CD and not using the credit cards until both they and the loan are paid off.

So why not just use the money put away into the CD to pay off the credit card debt?

Once the secured loan is paid off in a timely manner it adds a much needed positive mark to your credit report.

Chris Miller knows what it is like not to have a perfect credit score while trying to pursue the dream of home ownership. His website OwnaHomeWithBadCredit archives and regularly updates with the latest information and articles on the internet to help you overcome the obstacles associated with bad credit. http://www.ownahomewithbadcredit.com