After poring over your finances, calculating your debt obligations and running through the math again and again, you finally made a choice to use debt consolidation loan. You did you research, checked rates and you have selected the best lender that can provide you with the loan that you need. You submitted the filled out application form together with the requirements and you are now waiting to hear word from the lender.
But what if instead of getting a loan approval, you get word that you were declined? What are you to do with your debt now?
Find out why your loan was declined
While you may want to panic, you don’t have to. If you really did your research before opting for debt consolidation loan, you should know that there are other options to get out of debt. But before you go running to another debt relief program, you need to do one thing first: find out why you were declined.
This is very important because it could be a simple mistake and you should have been approved after all. Whether you were applying for a debt consolidation loan, a personal loan, mortgage or a secured loan, you have the right to demand the reason for the disapproval of your application. There are many reasons for that.
Not enough income. If your loan was denied because of a low income, there is nothing much that you can do about it – unless you have another source of income that you can present to the lender. If the lender computed and they think you cannot afford your payments, they have every right to deny your loan application. You can probably consider lowering your loan also. Ask them what loan amount your income can afford.
Too much debt amount. Another reason is when your lender thinks that you will have too much debt if you add this new loan. You can call them up to let them know that you plan to use the money as a debt consolidation loan wherein that amount will be used to pay off the others. Depending on the lender, they can probably reconsider your application. Or, you can look for another lender who specifically provides debt consolidation loans and they should understand the high debt amount.
Low credit score. In a lot of cases, lenders disapprove a loan because of a low credit score. You may want to request for a copy of the credit report that they got or you can ask for the name of the credit bureau that provided it. You can download your own free copy through the AnnualCreditReport.com website so you can check if your records. If you do have poor credit score, then the basis of the disapproval is sound. If you insist, you might get a high interest rate on your loan and that defeats one of the benefits of this particular debt relief program – which is a low interest. If there are discrepancies to your report that led to your loan disapproval, that should be disputed. Send a letter of dispute to the credit bureau that released the report so they can investigate the error.
If your problem is really your credit score, you know that you have to do something about it. Practicing proper financial management and payment behavior are some of the things that you can do. Lowering your debt amount is also something that will help you improve your score. But if you cannot do that through a loan, there are other options that you can use to help you pay off your debts.
Consolidating debts without a loan
If you cannot push through with debt consolidation loan, do not lose heart because there is a way for you to get out of debt. You still have two options that usually does not care if you have a low credit score or not.
One way to consolidate your debt without the need for a loan is through debt management. This program involves the help of a credit counselor who will help you with your debts. The presence of the professional is actually one of the benefits of debt management. In this program you will discuss your finances with the counselor. They will provide you with your options and also give you tips on how you can keep yourself from making the same financial mistakes in the past. During the analysis of your finances, you will both come up with a debt management plan or DMP that will contain your proposal for a lower monthly payment. This will be presented to the creditor by the counselor. When approved, you will send a single payment and the counselor will distribute it to your various credit accounts. They will also try to negotiate for a lower interest rate. This all comes with a fee of $50 a month or less. This debt relief option will not mind a low credit score or a high debt amount but they will require that you have enough income to cover your DMP.
The other option to get out of debt without a loan is through a new zero interest credit card. The idea is to find and open a new account that offers an introductory teaser rate. Usually it is a zero interest promo that will run from 6 to 18 months. You will transfer your high interest credit card debt to this account for a fee of 3% of the amount shifted. When transferred, any payment that you make towards this card will only be deducted to your principal debt. No interest will be added despite the balance that will be carried over within the promo months. Just make sure that you read all the details of the promo. For instance, what will happen if you make a late payment. Some creditors will terminate the promo and give you a high interest immediately. Also, know if the zero interest is applicable to the balance transferred only or can it be applied to new purchases too.