Why am I getting denied for debt consolidation?
As already discussed, there are three major reasons why people are denied debt consolidation loans. They don't make enough money to keep up with the payments; they have too much debt to get the loan, or their credit score was too low to qualify. The answers to the first two problems are clear.
Insufficient credit history or poor payment history can also lead to a denial of a debt consolidation loan. Remember, your payment history is the most important factor in your credit score, comprising 35% of your FICO® Score. Even one missed payment can damage your score.
If you have excellent credit, high income and are borrowing a relatively small amount of money, it can be easy to get approved for a debt consolidation loan. On the other hand, if you have poor credit, low income and are applying for a large loan, it may be difficult to get approved.
A lender will use your credit report as well as their own lending criteria to make a decision on whether they will offer a loan. If you are not on the electoral register or if you have recently moved jobs or house, then these factors can affect a lender's decision to decline a loan application.
If you don't qualify for a consolidated debt loan on your own, you may be able to find a family member or friend who does qualify and get them to co-sign the loan with you. The bank can then qualify you for the loan based on the financial strength of your co-signer.
Even with debt consolidation loans for bad credit, approval isn't guaranteed. Lenders typically look at multiple factors when evaluating a loan application. For example, you might be denied if you don't meet income requirements or if your debt-to-income ratio is too high.
You can have more than one debt consolidation loan at a time, but you'll need to follow your lender's guidelines. Some lenders limit the number of loans you can have at one time, or how soon you can apply for a second loan after receiving the funds from the first.
In general, your chances of getting a debt consolidation loan are better if you have a good credit score, usually defined as 670 or above by FICO. In some cases, your credit report may have errors that are bringing your score down, so first, you'll want to check your credit report to make sure everything is correct.
Every lender sets its own guidelines when it comes to minimum credit score requirements for debt consolidation loans. However, it's likely lenders will require a minimum score between 580 and 680.
Generally, borrowers with scores of 740 or higher will receive the best interest rates, followed by those in the 739 to 670 range. If your credit score is lower than 670, debt consolidation may not be a good option for you.
Can I be denied debt consolidation?
Lenders like to see a credit score of at least 670 for a debt consolidation loan, but probably closer to 700 just to be safe. It's not the only factor that matters, but a low credit score could stop you from getting a debt consolidation loan with reasonable interest rates and terms.
- SoFi: Best for fast funding.
- Upgrade: Best for poor or thin credit.
- Achieve: Best for quick approval decisions.
- LendingClub: Best for co-borrowers.
- Discover: Best for excellent credit.
- Happy Money: Best for credit card consolidation.
- LightStream: Best for large loans.
While there are no government debt relief grants, there is free money to pay other bills, which should lead to paying off debt because it frees up funds. The biggest grant the government offers may be housing vouchers for those who qualify.
An alternative to consolidation is debt relief, not to be confused with federal debt forgiveness proposals using the same name. 8 Rather, it's when a company negotiates with your creditors on your behalf.
- Step 1: Stop taking on new debt. ...
- Step 2: Determine how much you owe. ...
- Step 3: Create a budget. ...
- Step 4: Pay off the smallest debts first. ...
- Step 5: Start tackling larger debts. ...
- Step 6: Look for ways to earn extra money. ...
- Step 7: Boost your credit scores.
National Debt Relief is a legitimate company that has helped hundreds of thousands of people negotiate their debts. The company's debt coaches are certified through the International Association of Professional Debt Arbitrators (IAPDA).
It is 180 points away from being a “good” credit score, which many people use as a benchmark, and 120 points from being “fair.” A 520 credit score won't knock any lenders' socks off, but it shouldn't completely prevent you from being approved for a credit card or loan, either.
Loan debt consolidation is when you take out a new loan to pay off multiple debts. Four types of debt are commonly consolidated: credit card debt, student loan debt, medical debt and high-interest personal loan debt. You may reduce the overall cost of repayment by securing better terms and interest.
Loan amounts usually range from $1,000 to $50,000 with repayment terms from two to seven years. Let's say you have four credit cards, each with a $5,000 balance. Instead of making monthly payments on each credit card, you take out a debt consolidation loan for $20,000 and use that money to pay off your credit cards.
Debt consolidation itself doesn't show up on your credit reports, but any new loans or credit card accounts you open to consolidate your debt will. Most accounts will show up for 10 years after you close them, and any missed payments will show up for seven years from the date you missed the payment.
Do you need proof of income for debt consolidation?
You'll need basic proof of identification, like a driver's license and Social Security card, as well as documents to prove your income, like pay stubs, bank statements and tax returns. You'll also want to gather the latest statements from your loans and credit card accounts.
Expert Take: Achieve takes the spot as best debt consolidation loan due its competitive terms, quick funding and low minimum credit score requirements. The lender also allows potential borrowers to apply jointly, which makes it easier for those with fair credit to qualify for a loan.
Banks, credit unions, and installment loan lenders may offer debt consolidation loans. These loans convert many of your debts into one loan payment, simplifying how many payments you have to make. These offers also might be for lower interest rates than what you're currently paying.
You can consolidate debt by completing a balance transfer, taking out a debt consolidation loan, tapping into home equity or borrowing from your retirement. Additional options include a debt management plan or debt settlement, though these options may hurt your credit score.
- Take advantage of debt relief services. ...
- Reduce interest where possible. ...
- Focus on your highest interest rate first. ...
- Take advantage of opportunities to earn extra income. ...
- Cut expenses where possible.
References
- https://www.creditninja.com/if-i-consolidate-my-credit-cards-can-i-still-use-them/
- https://www.experian.com/blogs/ask-experian/thinking-about-consolidating-debt-good-idea/
- https://homework.study.com/explanation/does-debt-consolidation-affect-buying-a-car.html
- https://www.investopedia.com/terms/r/repayment.asp
- https://www.investopedia.com/terms/d/debtconsolidation.asp
- https://www.experian.com/blogs/ask-experian/how-to-consolidate-debt/
- https://www.bankrate.com/personal-finance/debt/pros-and-cons-of-debt-consolidation/
- https://www.debt.org/consolidation/does-debt-consolidation-hurt-credit/
- https://www.whitejacobs.com/how-many-points-will-my-credit-score-increase-if-a-collection-is-deleted/
- https://www.incharge.org/debt-relief/debt-consolidation/high-debt-to-income-ratio/
- https://wallethub.com/answers/pl/debt-consolidation-loans-for-unemployed-2140856001/
- https://www.cnbc.com/select/best-debt-consolidation-loans-for-bad-credit/
- https://www.solosuit.com/posts/settle-collection-or-pay
- https://www.bankrate.com/loans/personal-loans/debt-consolidation-loans/
- https://www.equifax.com/personal/education/credit/score/articles/-/learn/what-is-a-good-credit-score/
- https://www.bankrate.com/loans/personal-loans/debt-consolidation-options/
- https://www.experian.com/blogs/ask-experian/how-debt-consolidation-apps-work/
- https://www.bankrate.com/loans/personal-loans/how-do-you-qualify-for-a-debt-consolidation-loan/
- https://www.usatoday.com/money/blueprint/personal-loans/best-debt-consolidation-loans/
- https://www.bankrate.com/personal-finance/debt/types-of-debt-you-can-consolidate/
- https://studentaid.gov/articles/5-things-before-consolidating-student-loans/
- https://www.jdcu.org/blog/best-way-to-consolidate-debt-without-hurting-your-credit/
- https://www.cbsnews.com/news/who-qualifies-for-credit-card-debt-forgiveness/
- https://www.cnbc.com/select/debt-consolidation-vs-debt-settlement/
- https://www.consolidatedcredit.org/ask-the-experts/does-debt-consolidation-close-credit-cards/
- https://www.moneymanagement.org/blog/understanding-the-statutes-of-limitations-on-debt
- https://www.forbes.com/advisor/debt-relief/freedom-debt-relief-review/
- https://www.cnbc.com/select/how-to-use-a-personal-loan-to-pay-off-your-debt-faster/
- https://www.incharge.org/debt-relief/debt-consolidation/loan-rejection/
- https://www.bankrate.com/personal-finance/debt/what-is-debt-settlement/
- https://www.forbes.com/advisor/personal-loans/best-debt-consolidation-loans-bad-credit/
- https://apps.apple.com/us/app/tally-pay-off-debt-faster/id1080856103
- https://www.mohela.com/DL/resourceCenter/consolidation.aspx
- https://www.experian.co.uk/consumer/loans/guides/debt-consolidation.html
- https://www.bankrate.com/personal-finance/credit/when-does-old-debt-fall-off-credit-report/
- https://www.forbes.com/advisor/personal-loans/debt-consolidation-loan-statistics/
- https://www.incharge.org/understanding-debt/credit-card/debt-stacking/
- https://www.forbes.com/advisor/debt-relief/national-debt-relief-review/
- https://nomoredebts.org/blog/debt-consolidation/solutions-when-you-are-declined-for-a-debt-consolidation-loan
- https://www.cnbc.com/select/debt-consolidation-pros-cons/
- https://www.incharge.org/debt-relief/debt-relief-low-income-americans/
- https://www.credit.com/blog/does-your-old-debt-have-an-expiration-date/
- https://www.bankrate.com/loans/personal-loans/using-personal-loan-to-pay-off-debt/
- https://www.solosuit.com/posts/improve-credit-score-after-settlement
- https://www.qade.co/post/how-long-after-debt-settlement-can-you-buy-a-house
- https://fortune.com/recommends/loans/best-debt-relief-companies/
- https://wallethub.com/credit-score-range/520-credit-score
- https://aro.co.uk/faqs/debt-consolidation-faqs/why-might-a-debt-consolidation-loan-be-declined/
- https://www.credit.com/blog/what-is-609/
- https://www.forbes.com/advisor/personal-loans/consolidate-bills/
- https://www.experian.com/blogs/ask-experian/how-to-get-a-debt-consolidation-loan-with-bad-credit/
- https://www.equifax.com/personal/education/debt-management/articles/-/learn/what-is-debt-consolidation/
- https://www.bankrate.com/loans/personal-loans/debt-consolidation-loans-with-bad-credit/
- https://www.pacificdebt.com/how-to-build-your-credit-after-debt-settlement
- https://www.debt.org/consolidation/turned-down-for-consolidation-loan/
- https://www.nerdwallet.com/article/finance/consolidate-debt
- https://money.com/get-items-removed-from-credit-report/
- https://www.creditrepair.com/blog/credit-score/what-happens-to-your-credit-when-you-pay-off-collections-accounts/
- https://www.incharge.org/debt-relief/debt-settlement/buying-a-house-after-settlement/
- https://www.cbsnews.com/news/the-fastest-ways-to-pay-off-debt/
- https://www.nerdwallet.com/article/loans/personal-loans/debt-consolidation-loan
- https://www.creditninja.com/blog/can-you-have-a-700-credit-score-with-collections/
- https://www.credible.com/personal-loan/debt-consolidation-loans/how-to-consolidate-bills
- https://www.lendingclub.com/resource-center/personal-loan/how-many-times-can-you-consolidate-debt
- https://nomoredebts.org/blog/debt-consolidation/5-reasons-people-are-declined-debt-consolidation-loans
- https://www.marketwatch.com/guides/personal-loans/how-to-qualify-for-a-debt-consolidation-loan/
- https://www.forbes.com/advisor/credit-cards/consolidate-credit-card-debt/
- https://www.oceanfinance.co.uk/loans/debt-consolidation/cant-get-consolidation-loan-what-should-i-do/
- https://www.investopedia.com/pros-cons-debt-consolidation-8424036
- https://www.moneyhelper.org.uk/en/everyday-money/credit/debt-consolidation-loans
- https://www.forbes.com/advisor/personal-loans/pros-and-cons-of-debt-consolidation/
- https://www.bankrate.com/personal-finance/debt/get-out-of-debt-on-low-income/
- https://www.cbsnews.com/news/ways-to-pay-off-10000-in-credit-card-debt/
- https://www.mutualmortgage.com/articles/buying-a-home/how-debt-consolidation-can-impact-your-ability-to-buy-a-home/
- https://www.nerdwallet.com/best/loans/personal-loans/consolidation-loans
- https://www.creditstrong.com/raise-your-credit-score-100-points/
- https://www.experian.com/blogs/ask-experian/how-long-does-debt-consolidation-stay-on-credit-report/
- https://www.experian.com/blogs/ask-experian/why-was-my-debt-consolidation-loan-denied/
- https://blueberrymarkets.com/market-analysis/news/consolidation-in-the-stock-market/
- https://www.forbes.com/advisor/personal-loans/how-to-get-a-debt-consolidation-loan/
- https://www.debt.org/bankruptcy/eliminating-debt-without-paying/
- https://www.incharge.org/debt-relief/consolidation-vs-settlement/
- https://www.experian.com/blogs/ask-experian/can-paying-off-collections-raise-your-credit-score/
- https://www.investopedia.com/credit-card-debt-consolidation-a-step-by-step-guide-8418444
- https://www.bankrate.com/personal-finance/debt/pros-cons-of-debt-relief/
- https://www.consumerfinance.gov/ask-cfpb/what-do-i-need-to-know-if-im-thinking-about-consolidating-my-credit-card-debt-en-1861/
- https://www.incharge.org/debt-relief/debt-management/can-i-get-a-loan-on-a-debt-management-program/
- https://www.cnbc.com/select/credit-card-debt-lowering-credit-score-what-to-do/
- https://www.cnbc.com/select/does-debt-consolidation-hurt-your-credit/
- https://www.nidirect.gov.uk/articles/consolidating-debts