During times of financial crisis that arises out of excessive debts, people think about a debt consolidation loan to solve all their debt issues. They actually consider debt consolidation for combining their multiple existing debts into one perfectly manageable monthly repayment and for lowering their loan’s rate of interest. However, getting a debt consolidation loan approval is not such an easy task. Let’s try to understand why your debt consolidation loan request may be disapproved.
Bad Credit Report & Poor Credit Score
Having an exceptionally poor credit score along with negative loan payment history could ruin your chances of getting a debt consolidation loan approval. This is primarily the reason why it is of utmost importance to make all your payments timely and avoid allowing your debts to accumulate. A bad credit report would completely shatter your hopes of getting a debt consolidation loan as the authorities get a wrong signal about you and your intention. Therefore, you must focus on making your payments on time and examining your credit report and credit scores on a regular basis to identify errors quickly and get them rectified as soon as possible.
Not Adequate Income
Simply speaking, if you are short of cash and cannot make the loan repayments on time, all your chances of debt consolidation loan approval are extremely low. You require doing a job for earning a regular income to manage properly the cost of running your life on a daily basis. You also require making the loan payments along with some unanticipated expenses. Generally, a debt consolidation loan would be repaid over a period of 3Business years to maximum 5 years. This necessitates maintaining a robust income all through the loan repayment period.
No Credit History
Both bad credit history and no credit history would not help you if you are trying to get a loan approval. When you are absolutely new to a place, not having adequate credit history could prevent you from getting the loan approval. Low credit history would mean poor credit score and would also expose your lack of credit experience. It would certainly help lenders to form a wrong impression about you. They would feel that you are irresponsible and inexperienced in handling credit so you are not suitable for a debt consolidation loan.
Most creditors and authorized banks would generally, allow people to borrow a maximum sum that is equivalent to 40 percent of your total annual income. If your existing debt repayments plus the debt consolidation loan exceeds 40 percent of your annual income, you are in for trouble as your loan request may not be acceptable to them.
No Collateral as Security
Some lenders would be asking for collateral when you put in your debt consolidation loan application. Collateral is for the lender’s security. It is an effective way for lenders to make sure that they would not suffer any losses and could recover the loan cost should you default.
You must keep monitoring your debts and examining your credit report from time to time to determine if the document has the right values entered on it. Remember you need an accurate credit history. You would be requiring the information for guiding you on boosting your credit score.