When people are in a financial mess, they seek debt consolidation loans to resolve their debt issues. They choose debt consolidation because their objective is to combine effectively all their existing repayments into one single manageable monthly repayment at a relatively lower and more affordable interest rate. This could be a great idea for some people though obtaining a debt consolidation loan approval may not be such an easy affair as many people assume. Here are some of the main reasons why your debt consolidation loan request may be declined.
- You Are Not Able to Provide Any Security for Debt Consolidation Loan
Financial institutions usually look for collateral or security while approving a debt consolidation loan request. You should be able to provide some sort of a collateral or security particularly when you are not able to manage all your payments. These financial institutions would certainly want to get the entire money back which you had borrowed from them.
What would you do suppose you have no collateral to offer? Some people would be using their credit card for paying off their debts at around 20 percent interest rate. Some other people would be applying for unsecured loans from a reliable financial institution at around 30 percent interest rate.
However, these are of no help if your intention is to reduce debt. You would not gain from these because a bulk of your debt payment would go directly toward the interest and hardly anything would be diverted to the principal. Visit nationaldebtreliefprograms.com and seek assistance from experts in the field.
- You Have Issues with Your Credit Score & the Credit Report
There are numerous issues associated with a credit score and a credit report that could prevent people from getting an approval for their debt consolidation loans. For example, late debt payments could be adversely impacting your credit scores.
On top of these, owing high balances could further complicate this issue. There are many variables to it. It is, therefore, a good idea to read meticulously through a detailed explanation of what would be hurting your credit scores and exactly how your credit score would be calculated.
- Not Adequate Income to Be Eligible for a Debt Consolidation Loan
A credit card minimum payment is supposed to be extremely low and it would take several decades to pay off your credit card balance provided you have already stopped using your credit card while the payments are made. Consolidation loans require being paid off pretty quickly. You cannot take a long time for repaying your consolidation loans. You could do so only if your debt consolidation loans are secured by your house.
Debt consolidation loans are generally amortized over a period of at least, 3 to almost 5 years. This implies that the repayments need be high enough for paying off the loan within 3 to 5 years. If your income is not that high for handling such type of payments, your loan request could be declined.
- You May Not Have Adequate Credit History
Your credit history demonstrates how you have been using credit. If you have applied for a debt consolidation loan but you have not actually been using credit for a very long time, in your name then your loan request would be declined. A robust credit report would be requiring a lot of time to be created. If you cannot show a reasonably long credit history, it would certainly work against your loan request.
Another important aspect to this is when you have available credit with you but you do not use it. There is no point in storing a credit card in your drawer for safekeeping. You must use your credit card responsibly for gradually building a solid credit history.
It pays to do a thorough homework before applying for a debt consolidation loan. Once you know why loan requests are declined, you could work toward avoiding these issues.