When people are in a financial crisis, they often consider the option of debt consolidation which is an effective way of resolving their debt payments issues. They prefer taking out a debt consolidation loan for lowering their interest rates and combining all their outstanding payments into a convenient and easily manageable monthly payment.
that for some individuals, debt consolidation proves to be beneficial and is a
good idea. However, it is not so easy to get approval for your debt
consolidation loan. It pays to know the chief reasons why people’s debt
consolidation loan requests are declined. You would not get a debt
consolidation loan approval for the following reasons.
Top Reasons for Debt Consolidation Loan
If your loan
request was denied, it means that the lenders were not comfortable trusting you
with so much of their precious money. Let us examine the situation from your
You Cannot Provide Any Security for Your Debt
or collateral is something that creditors would like to depend on, should you
falter in your repayments. The commonly used kinds of securities are cars and
homes. Securities would help in making you seem less risky to the lender. The
lenders are relaxed with the idea that given the worst-case scenario, they
could sell your home or car for recouping losses.
institutions and banks often look for collateral or security when you put in
your debt consolidation loan request, particularly, if you are having a tough
time juggling multiple debts. They would like to make sure that they would be
getting back their money no matter what. They want to double-check that you
have a security to offer while borrowing an amount from them so that if you
falter in your payments, later on, they could use your collateral to retrieve
your borrowed sum.
You Have Credit Score or Credit Report Issues
score seems to be an important indicator of risk. It would be telling the
lender things like whether you have been consistent with your bill payments and
the amount of credit that you seem to be using and the likelihood of you
repaying the loan. Creditors would be using this important number for gauging
your financial responsibility.
application could be rejected because of issues in your credit score or credit
report. We know that debts in collection or late debt payments could damage
your credit score and tarnish your credit history. Often owing high balances
could create further complications. There are several variables, hence, it is a
good idea to do some meticulous research and understand exactly how your credit
score could be accurately calculated.
Your Income is Not Adequate for Fulfilling
Loan Eligibility Qualifications
income is one of the most vital numbers that banks and financial institutions
would be interested in. Lenders would not be interested in lending you any
money if you seem to be barely making enough for pulling along in life. This
seems to be a Catch 22 situation, you require a loan for paying your bills, but
you simply can’t obtain a loan unless you are capable of paying your bills. The
creditor feels that if you do not have sufficient income for paying your existing
loans, how could they grant you another one?
payments on credit card loans are quite low and so it could take decades for
you to pay off your outstanding credit card balance provided you have
completely stopped using your credit card anymore while making your outstanding
payment. You cannot pay off your debt consolidation loans extending over a long
period unless they seem to be secured by your house or other property. In this
context, you must know that debt consolidation loans are generally amortized over
three to five years. This implies that the payments must necessarily be high
enough for paying the loan off in just 3-5 years. Your debt consolidation
application may be denied if your income is not sufficient for handling that
type of payment.
You Do Not Have a Robust Credit History
credit history would be demonstrating the way you have been using credit all
along the past and currently, in the United States of America, Several
candidates who apply for getting a debt consolidation loan may not have been
utilizing credit for quite some time in their name. This could adversely impact
your credit report and credit score. It would be taking a long time for a
robust credit report or credit score to come up, hence, if you do not have a
long enough credit history, things could go against you and your loan request
could be denied.
factor is that you are having readily available credit but you are not using
it. Suppose you have a credit card but you do not use it and prefer keeping it
somewhere safe, this could adversely impact your chances of getting a debt
consolidation loan approval. You have to use your credit card in a responsible
way of building a robust credit history. You simply cannot sit back tightly
after getting a credit card. You need to use it to demonstrate that you know how
to manage your finances. You could examine your credit history by requesting a
credit report from Trans Union or Equifax for free. You may seek professional
services of a reputed organization such as NationaldebtRelief.com.
As per https://www.forbes.com,
if you are thinking of lowering the amounts owed by you, it is essential to pay
down the maximum debt possible and stay away from running up excessive balances
that you won’t be able to pay off straightaway. Your credit score is going to
go down if you are carrying a huge amount of balance in comparison to your
credit limits. This is because you are owing a huge amount of money or even
maxing out your cards, the creditors get the signal that you seem to be credit hungry
and even a riskier consumer than they had thought.
to keep in mind that credit unions and banks would be permitting you to borrow
a maximum of 40 percent of your precise gross annual income when you are
putting in an application for a debt consolidation loan. When you apply for a
fresh loan, all your existing loans would be considered and the proposed loan
would be added to the existing debt repayments just to examine if they exceed
the standard 40 percent. If they do, you would be compelled to apply for a
smaller amount or give up the idea of the loan altogether.
consolidation loan request may have been declined for just one of the
above-discussed reasons or maybe a wee bit of each reason would be applicable
in your case. It is pretty difficult to figure out precisely what triggered
this rejection. Moreover, different lenders could be having diverse reasons to
choose while giving out their loans.
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