Just like other types of loans, debt consolidation loan has a few requirements you need to meet. The requirements vary depending on which companies you sign up. The following are five things that the debt consolidation company will take into account before approving your application.
1. Credit Report
Creditors will want to take a look at your credit report prior to approving the debt consolidation loan. It can be harder to get approved if your credit report show that you have a lot of late payments and debts in the collection account. If your credit score is low, you should increase it before submitting your application. You can request for a free credit report from one of the 3 credit bureaus. You are to review and check your credit report for error records.
2. Credit History
You must build up your credit history if you want to get approved for the debt consolidation loan. There are many people who have been declined because they don’t have enough credit history. It can take some time to develop the credit history. If you have a credit card, make sure you use it responsibly instead of just keeping it. This can help you to build your credit history. It is important that your financial institution report to the creditor. You can find out detailed information on your credit history on the credit report.
There is a minimum income requirement you need to meet before you can qualify for the debt consolidation loan. Some of the things the creditor will take into account are annual salary, employment length and employment history. You will have to prepare proof documents such as rental, payslip and etc to show that you are capable of paying back the loan.
4. Minimum and Maximum Threshold
Many debt consolidation services have minimum and maximum thresholds for consolidating the debt. They won’t approve your application if the total amount of your debt is lower or higher than the minimum amount. For example, the debt consolidation company can refuse to approve your application if the total of your debt is less than $2,000.
5. Too Much Debts
If you have too much debt, the debt consolidation company may also not approve your loan. For example, if your total loan exceed a certain percentage of your income, they can refuse to approve your loan.
In conclusion, above are some of the factors that the debt consolidation company will take into account when creating a loan for you. Once you get approved, you can use the new loan to settle the bills for all your debts.