While banks, mortgage lenders and credit unions are in the industry of lending money, they don’t really view every applicant who applies for a debt consolidation loan as a strong candidate. Your application can be rejected, or you might get a loan offer with a high interest rate that won’t help you with your debt issues. What should you do if you are denied a debt consolidation loan? What other debt relief options should you think about?
Why Was My Consolidation Loan Denied?
Lenders who specialize in debt consolidation have a good tendency to accept you for a loan, so they usually go above and beyond to do so. As a result, there is usually a good reason why your application for a debt consolidation loan was denied. Sometimes the reason you were rejected is something you can fix, allowing you to reapply and be accepted. Let’s look at the potential reasons for your rejection and what you could be able to do to change it.
Your Credit Score is Low
Your creditworthiness, as determined by your credit score, is one of the criteria for eligibility for a debt consolidation loan. Your chances of being approved are reduced if your credit score isn’t high enough. Although you might be able to find a different lender that will give you a loan, it will almost definitely be one with a high interest rate that will end up costing you more in the long run and contradict the point of consolidating your debts.
If the reason you were turned down was because you needed debt relief badly, you should probably look into other options as improving your credit score is typically a time-consuming procedure.
You Don’t Have Collateral
A loan that is secured by property you own is the easiest type of consolidation loan to obtain. Your home’s equity, the value of your car, or other assets you hold may serve as collateral. However, if you stop paying, a secured lender may take possession of and sell these assets to retrieve the money you owe. You may not be approved for a debt consolidation loan if you have no assets to put up as collateral.
If you do not have any collateral, you should consider asking for an unsecured debt consolidation loan. But using an unsecured loan for consolidation would cost you far more. Unsecured consolidation loan interest rates range from 39% to 59%, depending on the lender. Using this strategy won’t likely help you pay off your debt quickly, since the interest rates are very high.
Not Making Enough Money
One of the main ways a lender determines your eligibility for a debt consolidation loan payment is by taking into account your present income and other financial commitments that won’t be consolidated with the loan, like a mortgage payment or auto payment. You might not be approved for a loan if your overall debt-to-income ratio, including the consolidation loan, is too high.
If this is the issue, you may want to find another job that offers enough money to reduce your debt-to-income ratio to the level it needs to be or look at other debt options that would be available to you.
Too Much Debt
A lender might be concerned about your ability to pay back a high amount of debt. They believe it could mean that your lifestyle is outperforming your income. If you have been rejected because you have too much debt, the solution is to find ways to lower some of your balances so that you can eventually be approved for a debt consolidation loan with low interest or again look at other debt options.
What Should I do If My Consolidation Loan is Denied?
You Can Get a Co-Signer for Your Debt Consolidation Loan
If you are unable to secure a loan to consolidate your debts on your own, you may be able to find a friend or family member who is and ask them to co-sign the loan with you. The bank will then evaluate your eligibility for the loan depending on the co-signer’s creditworthiness. Your co-signer will be required to cover your debt if you are unable to make loan payments for any reason. They will be held entirely accountable by the bank for the debt until it is repaid. You should exercise extreme caution before choosing this option because it has the potential to damage or strain your relationship with your co-signer.
A consumer proposal is another alternative for debt consolidation. A consumer proposal consolidates several unsecured debts, but it also enables you to make an offer to settle for less than the entire amount owed with no additional fees or interest charges. Payments can be made within a timeframe of five years. Another advantage of a consumer proposal is that your debt can be reduced by up to 80% and stops all interest immediately, and you keep your assets.
If You’re Denied for a Debt Consolidation Loan, Contact EmpireOne Credit to Speak with a Debt Expert
If you have exhausted all of your options after being rejected for a debt consolidation loan or if you are unsure of what to do next, you can speak with one of our debt experts for assistance. Our debt experts can assist you in getting rid of your debts and stop all interest immediately. We offer a free, confidential, and friendly consultation, so you can be sure that your situation will change for the better when you contact us. To get started, fill out the form on the page or contact us on (416) 900-2324 to get a free consultation. You owe it to yourself to be debt-free. Debt-free…Feels Good!