Top 5 Solutions When You Are Declined for a Debt Consolidation Loan
In our last article we laid out the top five reasons why people are usually declined for a debt consolidation loan. When someone is declined for a loan, they often look for other options or for what else they can do to get the loan. Here is what you can do:
1. Find a Co-Signer for Your Consolidated Debt Loan
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.
Although this may sound like an easy solution, it should not be entered into lightly. If for some reason you cannot afford to make the payments on your loan, your co-signer will have to make the debt payments for you. The bank will hold them 100% responsible for the loan until it is paid out.
Statistics seem to show that the vast majority of co-signed loans require the co-signer to make payments at some point. Since this has the potential to strain or destroy your relationship with your co-signer, you should be very careful about pursuing this option. To learn more about the dangers of co-signing, click here.
2. Put the Debt on Your Mortgage
As home prices have risen over the past number of decades, many people have become comfortable with adding their credit card and line of credit debt to their mortgage every once in a while. This can be a great way to consolidate debt if you own your own home and if you have enough equity in your home (this means that your mortgage is substantially less than the value of your home).
Paying off your debts by creating a second mortgage can significantly lower your interest rate and set up a payment that you can afford. However, if you don’t identify the reasons that caused you to incur your extra debt and address those issues, then you probably won’t get ahead by adding your debt to your mortgage. For many people this can become an annual ritual because they don’t learn to balance their spending with their income.
3. Learn to Live on a Budget and Avoid More Debt Problems
One of the most common reasons for people needing to consolidate their debts is failing to plan their spending, which in turn causes more debt problems. If your spending is not planned so that it is always less than your income, debt will naturally build up as you use credit to make ends meet.
If you learn to plan your spending and live on a budget, then you can not only avoid getting into more debt, but you can also dig yourself out from under a mountain of debt. In a worst case scenario where no other options are available, good old fashioned budgeting can slowly win the race and get you out of debt. To learn more about how to budget, click here.
4. Reduce Debt by Dealing with Your Issues
Some people try to get a consolidation loan thinking that it will bail them out of their financial mess and reduce debt, when they haven’t dealt with the issues that created their mess in the first place. Some people’s money problems stem from over-using credit, impulse spending, a bad business, not enough work, not paying bills on time or sometimes even an addiction.
If someone has a problem that is straining their finances, it is often best to address the problem before seeking a financial solution. Otherwise, if the problem continues, the person’s finances will continue to deteriorate and a consolidation loan won’t help for very long.
5. Speak with a Credit Counsellor If Declined for a Debt Consolidation Loan
If you have been turned down for a debt consolidation loan, and you have looked at every option you can think of, or you aren’t sure of what to do next, you can speak with one of our professional, non-profit Credit Counsellors to help get some direction. Our Credit Counsellors can help you put together a budget and then show you all of the options that are available to you (here's a glimpse into some potential options). Most non-profit Credit Counselling organizations offer confidential appointments for free, and we are one of them! So this can be a great option—especially if you’re not sure of what to do next.