Why You Could Be Turned Down for a Debt Consolidation Loan
Lenders look for a number of things when deciding your eligibility for a debt consolidation loan. The requirements can vary depending on your financial situation, the criteria the lender has, and whether you’re trying to get a secured or unsecured loan. Here are some reasons why you might be declined:
- Poor or bad credit rating
- Not enough credit history
- Recently applied for new credit
- No collateral like home equity or other recognized assets
- Too much debt
- Not enough income
If you’ve been turned down for a debt consolidation loan and need money now, it can be tempting to consider getting temporary relief from a payday loan. However, you may have other, much better options.
Dangers of Consolidating Debts
One of the biggest dangers of consolidating your debts is not waiting to use credit again until you’ve paid off your consolidated debts. That’s why many lenders make it a condition of your loan. For instance, if you consolidate credit card debt, after the cards are paid off, they are cancelled or frozen for at least a year or two. This gives you the chance to learn to live according to a solid budget that helps you keep your costs under control. If you skip this step when consolidating debt, you might find yourself racking up your credit cards or other debt again while still trying to pay off this big loan.
These are reasons why instead of consolidating your debts, it can be better to consolidate your debt payments through a debt management program. With a DMP, there’s no chance of doubling your debt because you’re not borrowing any more money. There are fewer consequences for missing payments, and a non-profit credit counsellor will negotiate for you to bring down interest rates. Rather than going it alone with a DIY debt consolidation approach, a counsellor will guide you through every step of the process and work to help you succeed.