You are in a deep financial crisis and don’t know if you qualify for a debt consolidation loan or even if that is the right answer.
Debt Consolidation Loan Qualifications
Whether or not you will qualify for a debt consolidation loan will depend on your credit rating, your income, and any collateral you can provide.
Before you apply be sure you have proof of your income, past tax returns, and perhaps a detailed income and expense budget (including current debt repayment). Your bank or lending institution will want proof that you will be able to repay the loan that you are asking for. By looking at your income and expenses, they can assess your monthly debt-to-income ratio. The is the percentage of your take home pay that is used for your monthly debt repayment and housing costs (mortgage costs & rent). An acceptable ratio is usually less than 36% although it varies by lender. Obviously if you are applying for a debt consolidation loan you may be at the high end of the range. Try our debt-to-income ratio calculator to see how your overall debt ratio compares.
Depending upon your credit risk, you may need to use your house or car as collateral for your consolidation loan. Using collateral will not only increase your changes of qualifying for your consolidation loan, it can also lower the interest rate cost you will have to pay if you are approved. Your bank may also ask for someone to co-sign for your loan if they think that on your own the loan is too risky.
If your application for a debt consolidation loan is denied, ask your lending officer why? It may be possible to remedy their concerns (reduce your existing debt slightly, improve your credit rating a little further) and re-apply in six months. Don’t apply at too many institutions hoping to get accepted somewhere if you have been denied 2 or 3 times. Multiple denied applications for credit show up on your credit report and hurt your credit.
If your shortfall is too large and you do not qualify for a consolidation loan you still have options to deal with your debt. Contact an expert today, they can help you find a solution to your financial crisis.