You apply for an instant debt consolidation loan but the application gets rejected. As disheartening that experience may be, it is not the end of the road. Here are 5 things to do if your debt consolidation loan is declined or rejected for any reason.
Understand Why the Loan Was Declined
Lenders have plenty of incentive to give out loans since that is the way they make money. However, if they reject your loan, it must be for a good reason. Figure out which reason lead to the rejection.
Three common reasons for loan rejection include:
- Too much debt
- Insufficient income
- Bad credit score and credit history
Take Help of a Credit Counselor
Determine why your loan application was rejected. Next, understand what to do to repair your credit. The best way to do that is by talking to a credit counselor.
Once he understands your current financial situation and the reasons behind the rejection, he can list out your options. He will suggest ways to improve your credit scores that you get debt consolidation loan instant approval.
The counselor will discuss the benefits of different debt consolidation loans and help you manage your debt effectively.
Improve Your Credit and Reapply
If your debt consolidation loan is rejected because of:
- Low income: Try to get a raise or supplement your income in other ways
- High debt: Work consistently on paying them down
- Low credit score: Pay your bills on time, reduce your debt as much as possible and try to avoid making major changes to your use of credit.
Be patient as your credit score cannot improve overnight. Once your credit score is high, you can re-apply for the debt consolidation loan.
Find a Co-Signer
If you do not qualify for a consolidated debt loan on your own, you can bring in a co-signer who has a stronger credit history. The lender can qualify you based on the financial strength of your co-signer. This will help you qualify for more competitive rates and terms as well.
If you are unable to make payments on your loan, your co-signer will have to make the debt payments for you.
Try Debt Consolidation Loan Alternatives
If your debt consolidation loan has been denied more than once, consider other options. Debt consolidation loan alternatives include debt settlement and balance transfer credit cards.
Balance transfer credit cards allow you to open up a new credit card with a 0% introductory APR offer attached to it. You can use that card to pay the debts and then pay down the balance before the card starts to accrue interest.
Debt settlement is when a third-party company acts as an intermediary between you and the creditors. Rather than paying the creditors, you pay into a savings account that is managed by the debt settlement company.
As you can see, there are several options that you can consider if your debt consolidation loan request gets rejected. Before you re-apply, make sure that everything is in order so that the application gets approved.
