Once people are in a financial mess, they often think about taking out a debt consolidation loan to solve their existing debt issues. They opt for debt consolidation simply to effectively lower their rate of interest on the loan and combine multiple debts seamlessly into one and have just a single monthly repayment that seems quite manageable.
As per https://www.huffpost.com, in case, you have tried to borrow money in a traditional manner, then you would readily identify with all the associated difficulties that are encountered on your way to the loan application. We understand that debts and loans have destroyed quite a few lives but borrowers are still practically undeterred since they regard loans as their necessary road to freedom from debts.
For some borrowers, however, taking out a debt consolidation loan seems to be a good idea and proves to be beneficial eventually. However, getting loan approval could be an overwhelming task. Let us explore the chief reasons why borrowers are denied a debt consolidation loan request. Once you are able to identify the chief reasons, you must try to find the perfect few solutions.
You Could Not Offer Any Security for Your Debt Consolidation Loan
Financial organizations often are looking for some collateral or security while you are putting in a debt consolidation loan request. Lenders are often insisting on collateral in the case, the borrower is having immense difficulty in making his monthly repayments or he is falling back on his repayments. Lenders would like to make sure that irrespective of any issues, they must be getting back the amount they have actually lent out.
If you do not have a home or some other asset to offer as security to the bank or a reliable lending institution, you may opt for basically, an unsecured loan generally, from a finance organization at 30 percent or even higher rate of interest. With an unsecured loan, the lion’s share of the debt payment would be going towards payment of interest and hardly any to the principal.
You Have Some Credit Score or Credit Report Issues
Your loan request could be denied if you have certain issues on your credit card or if your credit score is poor. Late debt payments and even debts in the collection could be hurting your credit score. This problem could become even more complex due to high outstanding balances. Understand clearly exactly how your credit score could be determined or accurately calculated. Try to boost your credit score even if it is a time-consuming process. Avoid doing things that could take a toll on your credit score. Keep monitoring your credit report and identify errors and get them rectified before they hurt your credit score.
You Do Not Have Adequate Income for Being Eligible for a Debt Consolidation Loan
Debt consolidation loan would generally be amortized over a period of three to a maximum of five years. This implies that the loan repayments could be high and so you need to have a good income to meet the loan-related expenses within three to five years. Your loan request could be declined if your income is not adequate for handling successfully this type of payment.
You Are Having Excessive Debt
Credit unions and banks would generally let you borrow a maximum of 40 percent of your total annual income for taking out a debt consolidation loan. This implies that whenever you ask a financial institution for a loan, they would be adding this requested loan to all other existing debt payments to make sure that it is not more than 40 percent of your annual income. In general, when you are having an overwhelming debt, you pose a lending risk to the financial institutions as such; your debt consolidation loan could be denied.
Some Solutions to Overcome Debt Consolidation Loan Rejection
Do you want to boost your chances of obtaining a debt consolidation loan approval? You may effectively follow these fundamental tips once your debt consolidation loan request has been declined. Just you must remember that no application could be guaranteed to obtain loan approval.
Look for a Co-Signer
If you are unable to qualify for consolidated loans by yourself, your case might be bolstered by the presence of a friend or family member who is eligible by themselves as a co-signer to the loan. Their financial strength will be considered a reliable enough argument to consider you for the loan.
This sounds like an easy fix but is not something that should be taken lightly. By co-signing the loan with you, the person is essentially agreeing to make the debt payments in their entirety if you default on them. The bank will not show any leniency and will hold them 100% liable until the loan is cleared. Statistics also reveal that most co-signed loans end with the co-signer making payments to cover for the original candidate at some point. Get professional lending advice from experts at National debt Relief.com.
Add Your Debt to Your Mortgage
With ever-rising home prices, many individuals are increasingly adding their debts to their mortgage now and then. This could prove to be an effective way of consolidating your debt provided you are a homeowner and you are having adequate equity in your house. This implies that your mortgage is reasonably less as compared to the actual value of your house. You could considerably lower your loan interest rate and set up an affordable repayment by paying off all your existing debts by setting up a second mortgage.
Conclusion: Live on a Tight Budget to Steer Clear of Debt Issues & Mental Stress
You fall into the vicious cycle of never-ending debts simply because you do not plan your spending properly. If you do not follow a monthly budget, you are sure to fall into the debt trap again despite debt consolidation. In case, spending is not well-planned to ensure that it is definitely less as compared to your income every month, debt would keep getting accumulated and you would find it difficult and pretty overwhelming to manage your ever-mounting debts. You must essentially modify your lifestyle and spending to avoid being dragged into more debts in the future. Remember smart budgeting is an effective way of getting back on track and ensuring financial stability.Updated Date: 06 August 2019, 08:15