What are exactly these debt consolidation loans? And why do people prefer them? Consider a situation where you have a lot of debts, and to cut down interest rates and to reduce the confusion of payment of multiple debts, then in this situation, you would go for a debt consolidation loan. It would be really stressful in dealing with high-cost debts. The EMIs would literally kill all your savings, and this is why people tend to prefer debt consolidation. This might seem like a cakewalk but no, the process is quite long, complicated and most of the people tend to get denied from these loans. No, let give a check on why people are getting denied from these loans and what they can do in such a situation!
Now let us come to the first question, why are people denied from these loans?
- Security is a hassle!
While you apply for debt consolidation loans, most probably the companies would ask you to provide them with collateral or security, and this mainly happens because they are concerned regarding you paying back their money. Now, what would be the situation if you aren’t able to provide security, in that case, most of the people would use up a credit card. Some people might even go for acquiring loans from banks and institutions at a higher rate. And here, the rate of interest is high. But either of the method you choose, the money you got to pay as interest tends to get added up and you still will have a long way to go!
- Credit score becomes a challenge.
Firms wouldn’t issue debt consolidation loan if you have a low credit report and you are down in credit scores. If you have already been held up a bankruptcy, naturally your credit scores would be low, and it would take quite some time to improve these scores. Another issue that would bring your credit score low is delayed payments of debts. Lastly, if you owe quite a huge balance, your credit scores would suffer.
- Your income doesn’t enable you to qualify for these loans.
You need to get this right, the interest you pay on credit cards are much lower than what you pay for debt loans. Payments for debt loans are quite high. These consolidation loans only help you in paying a minimum of their credit card bills. About credit cards, it is only after you have used up the card while making the payments you would pay them up. Like it is quite low that you might take a lot of years to end paying your credit card balances. About debt consolidation loans, you just can’t take years and decades to pay them off` unless and until you had provided some security or mortgage. It would take nearly three to five years to pay off debt consolidation loans which mean that the amount you pay monthly would be quite high!
- All boils down to your credit history
There would be a check on how you use your credits, as well as your respective credit history would be checked. By most chances, the people who go for paying debt consolidation loans wouldn’t have used credit for a long time. Just so you have a credit card doesn’t assure you a good history. You have to use the time to time to build a history. Now if you have taken up loans as a joint account, most of the banks would specify the details of the borrower who is primary.
Are you worried about how your credit history looks like, well you can check them up online along with the reviews of top debt consolidation companies?
- Huge amounts of debts!
Most of the companies will deny loans if you are requesting for more than fifty percent of your annual income. Most of the banks would provide you with a form to fill in your details related to income, and if they find your income to be less than forty to fifty percent of the amount you apply, you would be denied, and you got to apply for a smaller amount.
Now that is all about why you are denied debt consolidation loans. In the following section, let’s understand that factors that can help us to get the consolidation loan easily without hassles.
- The best thing you can do is to find a co-signer
Now imagine you don’t qualify for consolidation loans, but do you have a family member or a close friend to support you? Then you are on the safe side! Get them to co-sign the loan for you and based on the credit score and credit history of your family member or friend or co-signee; you would be granted a loan.
But this doesn’t sound as easy as it seems! If you are unable to make payments, then the bank would hold the co-signee completely responsible for the payments. So if you don’t pay, you would get them into trouble. According to research, it has been found that most of the loans made from this kind, requires the co-signee to pay at some point. And this would create issues as it would cause issues and strain the relationship between you and the co-signee.
- Use up a mortgage
If you have your own home, you can consider adding a credit card by mortgaging their home. It has been followed currently due to the increase in house prices. How would this create an advantage for you? Here the interest rates will be lower, and you will be able to afford to pay them! This is a great way you can try to create a balance between income and expense.
- Stick to a budget!
This is the best thing you can do! Do your best by checking out where exactly you spend. Because if you don’t really care about spending, you might have to acquire more and more loans and credit cards to balance and make both the ends meet.
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