You’re knee-deep in your credit card debt and have student loans to pay off, whereas you also have more mortgage and car loans to pay off. Are you freaking out? Are you flipping scared that you don’t make a minimum monthly payment, and it may lead you to a serious case of debt?
Your one solution – get a credit card consolidation loan!
What is debt consolidation?
That consolidation is a format of streamlining all your debts and placing them into a single consolidated personal loan. By doing so, you can help reduce the amount of interest that you pay each month to each of your payments and instead, through this format, you can lower the overall monthly payments while making payment for your debt. The entire goal is to combine all your debts into one loan for a single payment each month. You should do this by yourself or work alongside a credit counselling agency that helps you streamline your debts.
Most people apply for Credit card consolidation loans. However, they get turned down. But not many know the reasons behind being turned down. If you are planning on getting a credit card consolidation loan, you may want to consider these aspects and rectify the solutions at your end before applying for one.
Here are the reasons that you may get rejected for a consolidation loan:
- No security for the debt consolidation loan
Most often, financial institutes seek security or collateral to be placed in lieu of applying for a debt consolidation loan. This is especially true when someone is having difficulty managing their payments on time. In order to ensure that no matter what is the money that they lent out will be returned, they ask for security or collateral to be placed.
When you don’t have security or collateral, most financial institutions turn down a credit card consolidation loan application.
- Issues with credit report and credit score
Another major reason that lenders such as banks turn down credit card consolidation loans is if once credit report and credit score have an issue which can prevent people from being approved. Before applying for a consolidation loan, ensure that your credit report and credit score are quite high
- Low income that doesn’t qualify for a debt loan
Usually, a debt loan payment costs higher each month rather than a minimum. By the time one realises that they could benefit from a consolidation loan, they may not be able to get one, as they can take decades to pay off a credit card balance if minimum payments are being made. A consolidation loan cannot be repaid for a long period of time, and they need to be paid immediately at a lump sum.
This means that the payment should be high enough to pay off the loan within a period of 3 to 5 years, and doing so requires you to have a high income that you’re making each month. If your income cannot handle this kind of payment, then you may be declined a credit card consolidation loan.
- Minimal credit history
Credit history is one of the most important factors. If someone applies for a debt consolidation loan and has not been using credit in their own name for a very long time, they will most likely be turned down for the loan as there is no history to prove if they can be paid off on time, in order to avail a loan or for a lender to give you the money you need to build a strong credit report and score. Doing so takes a lot of time.
Consider all of these aspects of your financial planning before you apply for a credit card consolidation loan at all. Once you rectify the errors you face, you will be approved for a loan quick enough.