What is a Debt Consolidation Loan?
A debt consolidation loan is a form of debt refinancing that combines multiple balances from credit cards and other high-interest loans into a single loan with a fixed rate and term. It can help you save money by reducing your interest rate, or make it easier to pay off debt faster. A debt consolidation loan may also lower your monthly payment.
And depending on your credit profile, a debt consolidation loan could help improve your credit by diversifying your credit mix, showing that you can make on-time monthly payments, and reducing your total debt.
Debt consolidation loans are great for moving your debt into one payment and improving your debt ceiling to improve your credit score and reduce credit card debt overall.
Approved or Denied?
Debt consolidation loans are great tools to get you to a point where you’re improving your debt situation. But there’s also the temptation that comes with these loans, and it can be a serious one. First off, with your credit cards at zero to near-zero balances, you may be tempted to get back on and spend again.
You may also be tempted to leverage part of your debt consolidation loan to square away other debts as the funds are typically dispersed directly to your checking account.
With these considerations in mind, it may be tempting to lean on debt consolidation loans as an option, but if you’re declined, it’s not the end of the world, and there’s a bright side to the fact that you may not be tempted to get back out there and spend money that you otherwise shouldn’t.
Things to Do if You are Declined for a Debt Consolidation Loan
As much as they’re intended to help those who have debt issues, debt consolidation loans can be difficult to qualify for. The expectation is that you still have good credit history and that your credit score is high enough to justify or prove your ability to repay.
Find a Co-Signer
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 qualifies and can help you by co-signing for 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 shouldn’t be considered lightly. If you can’t afford to make the payments on your loan, your co-signer will have to make the debt payments for you. The bank will hold the 100% responsible for the loan until it is paid out.
Put the Debt on Your Mortgage
As home prices have risen over the past number of decades, so too has the amount of equity available for securing prospective loans. Leveraging your home equity can be a great way to consolidate debt if you own your home and if you have enough equity in it.
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 fix what got you into debt, to begin with, you might not be able to get ahead by adding your debt to your mortgage. For many consumers, home equity is a fantastic way to save money and consolidate debt as needed.
Plan Your Spending
One of the most common reasons for the need to consolidate debts is failing to plan their spending habits, which in turn can cause more debt problems. If your spending is not planned so that it’s 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 well and live within the constraints of your budget, then you’ll not only avoid getting into more debt, but you’ll also dig yourself out from under a substantial amount of debt. In a worst-case scenario where no other options are available, budgeting can make a big difference between getting your debt paid down, and avoiding additional debt in the process.
Reduce Debt by Dealing with Your Issues
Some people apply for a loan thinking that it’ll bail them out of their financial mess, and reduce their debt when they haven’t dealt with the issues that created their financial habits in the first place. Some people’s money problems stem from overusing credit, impulse spending, not paying bills on time, or sometimes even an addiction.
When thinking in the long term, it’s often best to address the problem before seeking financial solutions. Otherwise, if the problem continues, the person’s finances will continue to deteriorate and a consolidation loan won’t help for very long.
Before continuing to add debt to your plate, turn the lens inward and consider what got you to this place, to begin with.
Talk to a Debt Expert
If you’ve been turned down for a debt consolidation loan, and you’ve looked at every option you can think of. A credit counselor can help get you on the right track. These financial professionals offer their services for free and leverage their years of experience to help guide you on the right path toward financial success.
Most non-profit Credit Counseling organizations offer confidential appointments for free. So this can be a great option, especially if you’re not sure of what to do next.
Seeking Answers from a Debt Relief Expert
Are you ready to take the next step toward a debt-relief plan that benefits you? We provide a debt consolidation program that is suited for you. Alleviate Financial can help you get back on track, no matter what your debt relief needs are or how long you’ve been in debt.
These popular reasons for personal loans may be effective in certain circumstances, but there are other debt relief methods that do not necessitate extra debt. The debt relief options we offer will help and guide you in resolving excessive debt.
Contact us at 800-877-2309 at Alleviate Financial today!