Wage garnishment can be a big hit to your budget, especially if you’re already in debt. If you’re having trouble making your payments, a debt consolidation loan may be the answer. But first, you need to make sure you qualify. Here’s what you need to know about getting a debt consolidation loan, even if you’re dealing with wage garnishment.
What is wage garnishment, and why does it happen?
A wage garnishment is a legal process where a lender takes an individual’s wages, typically as part of a debt repayment plan. Wage garnishment is often used to collect a debt owed to creditors or another party, such as the other parent in a child support case.
The law allows creditors or the courts to take a portion of an individual’s wages, up to 15% of the weekly gross earnings, to cover the debt. The creditor can take the money even if the debtor has already made payments on the debt. Wage garnishments can affect individuals who are not yet delinquent on their debts or who have less than $15,000 in debts.
How to get approved for a debt consolidation loan while your wages are being garnished
Only plan to borrow what you need
Debt consolidation loans can be any amount, but it’s best that you only borrow what you need to cover the entire amount of your debt. This way, you won’t have to worry about paying extra interest on a loan that’s not necessary. Try using a debt consolidation calculator to help you determine what the right amount to borrow is for your finances.
Work on building the credit factors you can control.
Wage garnishment doesn’t affect your credit on its own, but it’s likely your credit score has gone down from having outstanding debts sent to collections, so you’ll need to take steps to build the parts of your credit report you can that help mitigate the damage done. The three most significant factors that affect your credit are the number of on-time payments you make, the amount of debt you have in relation to your total available credit, and the length of your credit history. The more you focus on improving these three factors, the higher chance you’ll be approved for a debt consolidation loan.
Get help from a credit counseling agency.
Credit counseling agencies can advise you on how to improve your credit score and reduce the damage done by wage garnishments. They can also help you develop a budget and plan for paying off your debts more manageable over time.
Get pre-approved for a debt consolidation loan from a lender or credit union.
Before applying for a debt consolidation loan, see if you can get pre-approved from a lender or credit union. This will help you understand what’s available and how much it would cost. If you’re not able to get pre-approved, that could be a sign that your credit isn’t in good enough shape to apply for a consolidation loan just yet.
Take things one day at a time.
Don’t panic if you’re struggling to pay your bills on time. Take things one day at a time, and don’t allow wage garnishments to permanently ruin your credit score or derail your plans for financial stability. Wage garnishment is only a temporary issue, and staying the course will pay off if you’re patient and focus on what you can control.
The bottom line
A debt consolidation loan can solve many of your financial problems but can be difficult to get if you’re dealing with wage garnishment. However, if you focus on improving your credit score to mitigate the damage caused by your past financial mistakes, you’ll be on track to get approved for your next loan easily.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.