Getting personal loans, among others is not easier than ever. Lenders have lowered the requirements for most types of loans and they have reduced the restrictions on what can be done with the money. However, the interest rates have not changed, which means that, while it is easier to get a loan, the impact that it will have on an individual’s monthly budget is still as large as ever. This has led to situations where borrowers have taken out several loans, some with variable interest rates, only to discover that their debt has become too expensive to reliably support out of their monthly income. In some cases, it is possible to convince the lender to refinance a loan, however, this process has certain requirements that not all borrowers can meet.

Luckily, there is always the option of consolidating the debt and retaking control of one’s finances. Most lenders offer this option and the application and evaluation process usually takes under one month. Here is what you need to know:

What Is Debt Consolidation?

Debt consolidation refers to the process through which an individual can take all of his outstanding debt, regardless of form (it can come from maxed credit cards, personal loans, payday loans, and anything in between), and consolidate it in a single form of debt that has one interest rate and one monthly repayment date. For all intents and purposes, debt consolidation is done through a relatively large, secured personal loan. It usually comes with a term of at least 5 years and has a fixed interest rate. This having been said, it is important to keep in mind that some lenders may place restrictions with what can be done with the money. For example, depending on an individual’s credit rating, a bank may restrict the usage of a debt consolidation loan to repaying money that has been loaned by the bank itself. However, these are isolated cases.

Applying for a debt consolidation loan is easy. The borrower must go to the bank and ask to have his debt consolidated. He will be made an offer by the bank’s representatives and then discuss what property will be used as collateral. In most cases, lenders request that the loan be secured against the borrower’s home. This will give him access to a large debt consolidation loan that will have to be repaid just like any other loan.

Why Get a Debt Consolidation Loan?

Having multiple forms of debt is not only a financial nightmare but a scheduling one. Each loan has a different interest rate, a different value, and a different monthly repayment date. Keeping up with several forms of debt is difficult and can also be extremely expensive, particularly if you have any variable interest rate loans. A debt consolidation loan helps simplify things by enabling individuals to take out a single, secured loan that is large enough to cover most if not all other forms of debt. This leaves borrowers with a single affordable loan to worry about.

How to Use It?

As the name implies, these loans must be used to consolidate one’s debt. In other words, the more forms of debt one can repay using the money from it, the better. Start by repaying the smallest loans that have the highest interest rates. This should include credit cards and payday loans. After that move to larger ones. However, it is important to keep in mind that some loans may have early repayment fees that need to be repaid. Furthermore, it is a good practice to first try to refinance as many loans as possible. This will allow borrowers to get the lowest possible interest rates before consolidating the debt.

A home equity line of credit is one of the most affordable ways to borrow money from a bank. The fact that these lines of credit are secured against the borrower’s home equity allows the lenders to offer very low-interest rates and high values. They offer a large degree of freedom, as the money can be used for anything that the borrower needs, and can even be refinanced in case of an emergency. This having been said, getting a HELOC is not a particularly easy process.

There are several moving parts that both borrowers, as well as lenders, need to consider before coming to an agreement. Generally speaking, requesting a HELOC and having the application accepted can sometimes take over 30 days. However, this time can be shortened by doing a few things prior to submitting your application to the bank.

  1. Establish the Value of Your Home

A home equity line of credit needs to be secured against the equity that the borrower has in his home. This means that a full appraisal may be required, depending on how much the real estate market has changed since the borrower has bought the home. Go to the bank and ask if the appraiser can be brought in by the client or if the bank has its own specialist. If borrowers can have their home appraised and then submit the results to the bank, it is advisable to do that as soon as possible. This can cut 3-4 days off of the application process.

  • Give Your Credit Rating a Boost

Generally speaking, having an ample financial history that lenders can look at is useful, however, having many outstanding debts or a low credit rating can, in fact, lengthen the eligibility process. Try to pay off your credit cards before applying for a HELOC. Also repay your any short-term loans that you may have, such as payday advances. This will not only give you a slight credit boost but also shorten the time it takes the lender to approve your request.

  • Ask the Bank Clerk to Send You a List of Requirements

 Most bank clerks will be able to send you a list of all the documentation that is required to get a HELOC. Most of these documents must be submitted by the borrower, and it is better to have them prepared when first going to the bank to discuss the line of credit.

  • Get Your Papers in Order

Make sure that all the required documentation is in order. Half of the cases where the approval process for a HELOC is slowed down is due to a mistake in spelling or an error in the documentation. Go through all of the papers that you need to submit and make sure that the addresses, names, personal identification details, and signatures are spelt correctly and clearly visible. Furthermore, keep the documents together so that you don’t forget anything when going to the bank.

  • Send the Documentation Digitally (Email or the Bank’s Website)

Some banks allow their clients to send in the documents needed for loans through email. While it is usually better to submit them yourself, to a bank clerk, so that he may explain if anything is not in order, it can be faster to send the documents digitally. This is usually a foolproof method if you have constantly been in contact with a bank representative and have followed his instructions regarding the required documentation. Sending the documents digitally enables bank clerks to redirect them to the headquarters faster, further reducing the evaluation time.