Denied A Debt Consolidation Loan? Why Not Explore Other Options

Many people agree that debt consolidation is the best option to organize multiple loans. After all, instead of paying multiple small loans, with all different interest rates, it is best to take one bigger loan, pay all those smaller ones, and then concentrate on paying just one. Besides, there are always chances of getting better terms and better interest rate on the consolidated loan.

Now, what if your application gets rejected?

This can certainly happen, but a poor credit score isn’t the only reason for which you could be denied. So, before moving on to other options, let’s understand the reasons why you might have been denied a debt consolidation loan. After all, once you know why you were denied, you can prevent it from happening again.

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Most common reasons you may have been denied a debt consolidation loan:

1. Large outstanding debt: It can be very difficult to qualify for a consolidation loan if you have a very large outstanding debt to pay off. Of course, you are after all trying to consolidate them all, but these loans leave an unfavorable impression on most lenders.

2. Debt to income ration (DTI): This is something every lender will calculate. If your total debts are more than half of your annual income, you will not be able to qualify for a consolidation loan. 20% DTI is considered as good, and most of the lenders will not prefer loaning you any money if your DTI is over 43%.

3. Lower credit score: Almost all the lenders have a minimum credit score requirement. A low credit score will not be accepted by any lender, and even if it does, you won’t be able to secure a loan on better terms than what you already have.

4. No collateral to support the loan: If your credit score is low, most of the lenders will expect you to back your loan with a collateral. However, if you don’t have one, chances are less to qualify for a debt consolidation loan.

What are your alternatives?

Acquire a loan with a cosigner: If someone with a better credit score or higher income cosigns the loan with you, you can qualify to get a loan. However, not every lender will allow this, so you will have to find one who does.

Take a bad-credit debt consolidation loan: If you are not able to acquire a loan with a cosigner, you can try to get a loan from a lender who works with all types of credit scores. Nevertheless, keep in mind that the terms and conditions of the loan won’t be very favorable for you.

Apply for a home equity loan: In this type of loan, you can use your home as a collateral to acquire a loan. However, there are chances you might lose the house if you are unable to pay off the debt.

Lastly, in extreme cases it is always a good idea to seek some debt management. A credit counselling agency will negotiate with your creditors and as a result you can expect to get a debt settlement. Also, you can always turn to reliable lenders like LoanPig.co.uk and try to learn more about their loan options.