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Consumer credit debt consolidation allows you to negotiate lump sums for all of your existing loans and pay your debt off with a single new loan. You then pay one monthly payment to the debt consolidation company. The process is similar to refinancing your debt with a new loan. Taking out the new loan at a decent interest rate relies on a number of factors in your financial stability; employment is one of those factors. When you are unemployed and seeking debt consolidation, you will face more challenges with the process. To make the process a success, be prepared for the special circumstances of your case.
Consider "Financial Hardship"
Entering debt consolidation will negatively affect your credit score and financial history. Debt consolidation should only be considered as an option if you cannot repay your debt on your own. When you first lose your job, you may be tempted to move into consolidation. First, you should explore financial hardship options with your lender. Many lenders will allow for a grace period where you do not have to make any payments as a result of job loss. In some cases, even interest may be postponed until a date in the future. This can give you enough time to locate a new salary and resume making payments yourself. In other cases, a lender will continue to charge you interest in the time your loans are suspended. Because of this, you need to make every attempt to resume payments at the earliest possible date.
Prepare a Diligent Application
You need to prepare a careful application if you determine debt consolidation is the best option for you. This application will be the basis of a number of factors including whether or not you are approved and at what rate. Many debt consolidation companies are anxious for your business, but you will still need to give reason to believe you can meet your new payments in order to be approved. Since you are unemployed, the number one way you guarantee your ability to make payments has been taken away. Most lenders consider your income very heavily when extending you a loan. Placing down collateral is one way to appear less risky on an application. This is called a secure loan. Homes, automobiles and businesses are the most common forms of collateral. Be wary when posting collateral, though, because you will lose that collateral in case of default. Providing references, using a co signor and providing a down payment may also increase your ability to secure a good loan without putting as much at risk.
Be Prepared for High Interest Rates
Debt consolidation programs are high risk loans and usually come with high interest rates as a result. When you are unemployed, your rates will be even higher. You need to be prepared to make monthly payments and accept the high interest rates. There is some room for negotiation, but there is not much negotiating when you are unemployed and not an attractive loan candidate. Cut back on your spending and commit to paying off your loan.
