How to know whether or not you can get a debt consolidation loan
Debt consolidation loan is a very useful tool for becoming clean of all your past debts.
This is totally a Do It Yourself concept, and you will be doing everything, without any third party getting involved.
A debt consolidation loan, in general, looks like a personal loan, only that the purpose differs from other conventional personal loans.
Even though there are no set rules as of qualifying for a debt consolidation loan, yet lenders might be scrutinizing some factors before handing over a loan to you.
The reason is that, you are already in debt.
And, while being in debt, you are about to take out another debt.
A deadly game of paying down debts with debts!
If a single thing goes wrong, then you will be in deep trouble, and so will the lender lose all the money, that he’s lending to you.
For this reason, you will be facing some difficulties while taking out a debt consolidation loan, as lenders want to view you as a potential borrower, and not just another hobo, having no control over his finances.
Here are a few criteria that should be met, before you get your hands on a debt consolidation loan:
Your debt history:Your past debts, and their respective payment histories, speak enough for your debt habits, and activities.
Lenders always search for someone, whose past debt record is clean. You might argue, that the reason for taking out a consolidation loan is that your are in debt, then why should the lenders check your debt status!
Because, the lender wants to be sure, that you have the interest and tenacity to pay off your debts, instead of escaping from the debt obligations and responsibilities.
If the lender sees, that you never tried to make a single timely payment, on your previous debts, in spite of having a sufficient moderate income, then you can be pretty sure to suffer rejections for any debt consolidation loan you plan to apply for.
Therefore, if your debt history is not upto the mark, then there might be a good deal of difficulties, for you to get approved for a consolidation loan.
Your credit score:Next, is obviously your credit score.
This is not the primary concern for the lender, as those who apply for debt consolidation loan, usually have poor to average credit score.
Hence this might not be very important, but yes it definitely matters! If you are having a very poor credit score, then getting a loan will be a bit tough.
The loan amount:Lastly, it is all dependent on how much debt you have, as you will be getting a loan of an amount equal to the total debt balance you have.
Suppose you want to take out a consolidation loan, of a huge amount, like more than $30k, or so, then the lenders will be very strict with the terms.
They might even want to keep a collateral for this loan, as there is a question of security. Your home equity can get attached as a collateral, or your car, or any physical property, that you own.
But, here is one suggestion.
If you are taking out a secured debt consolidation loan, then it’s better that you drop this idea, and instead take out a Home Equity Loan, or open a Home Equity Line Of Credit (HELOC).
However, debt consolidation can only be applied to unsecured debts. So, it might not be a good idea overall, to transfer all these unsecured debts into a secured one.
If you are not getting a large amount unsecured debt consolidation loan, then you might need to get help from a debt consolidation company.
Know in full detail, how professional debt consolidation works.