During a period of unemployment you have some serious decisions to make regarding outstanding debt. Debt consolidation is often an option consumers may use to help manage their debt. This includes combining outstanding loans with a new loan that pays off what was owed, leaving just one payment to be made each month instead of multiple payments on different accounts. It may sound like a great idea but if you’re unemployed, you’ll want to review the option more closely before making a decision.
Debt consolidation allows debtors to pay off creditors with a new loan, which makes monthly payments easier to manage. Instead of multiple payments, one payment would be made to one creditor. This may require obtaining a loan and if you aren’t able to show how you’ll be able to pay back the loan, this could pose a problem, especially after a job loss.
If you are looking to seek a loan for debt consolidation while unemployed, lenders often won’t lend to a consumer without steady income. Even if you are receiving unemployment benefits or have collateral of value; unemployment benefits may be a source of income but they are seen as something temporary until something permanent is obtained.
Collateral such as personal assets, funds in savings or other items of value may increase your chances of obtaining a loan. Credit card companies may allow for balances to be transferred to a new card with a lower interest rate. If you have a good payment history and a good credit rating, it’s likely you’ll be able to get a card with a lower rate. Low rates may also help reduce monthly payments but credit cards often have terms that need to be reviewed carefully upon applying.