By Charlie Brown

When people are going through financial crisis, they often opt for debt consolidation for coming out of an overwhelming debt situation. You could eliminate your debt issues and enhance your financial condition by taking out a debt consolidation loan. Debt consolidation loan would imply lowering the rate of interest and integrating multiple payments into one single consolidated manageable monthly payment. Debt consolidation loan could be a boon for many people but it is not so easy to get a debt consolidation loan approval. Here are some of the most common reasons why debt consolidation loan applications are declined.

You Are Not Able to Offer Any Security

Banks and other traditional financial institutions would be looking for a collateral or security for offering you a debt consolidation loan, especially, when a person is struggling to manage all the monthly repayments. The banks and other institutions would like to get an assurance that they would be getting back the money, no matter what happens. So, lack of a security or collateral would mean your loan application is likely to be rejected.

So what would be your other alternative to debt consolidation in such a case? Several debtors would use their credit card for paying off their debts at high-interest rates while others may apply this time for an unsecured loan at 30 percent or even higher rate of interest from a reliable finance company. However, these two options cannot be smart solutions if you are thinking of eliminating your debts as a huge chunk of your payment would be going directly to the interest and hardly any would be going to the principal. Visit for perfect debt consolidation solutions.

Credit Score & Credit Report Issues Are Present

Your debt consolidation loans could be rejected if certain errors or discrepancies are identified in your credit score or your credit report. Late payment of debts or even debts in collections could be damaging your credit scores.

Inadequate Income for Application Acceptance

The fact is that a debt consolidation loan payment would be costing more every month as compared to paying only the minimum amount due on credit cards. Actually, sometimes it is too late for people to understand how a debt consolidation loan is going to prove beneficial to them. By the time, they try to seek a debt consolidation loan; they may not be in a financial position to make the mandatory monthly repayments involved in a debt consolidation loan. If your income is not sufficient enough to make the monthly repayments consistently, your debt consolidation loan application is sure to be declined.

In this connection, you must understand that the minimum payments associated with a credit card are so low that it would take a few decades for you to pay off the loans and this would only be possible provided you have already stopped using your credit card once you are making the payments. Debt consolidation loans are not supposed to be paid over an extended time span unless those loans are secured with some collateral like your home etc.

Debt consolidation loans are generally, known to be amortized between 3-5 years. If the monthly income is not large enough to handle such type of a payment, your loan application is sure to be declined.

Lack of Adequate Credit History

Your credit history would be demonstrating the way you utilize your credit. Many debt consolidation loan applicants have not been utilizing credit for a considerable time in their names. Remember it is time-consuming as far as credit score or report development is concerned. So, it is important to have a proper credit history. Your loan application would be declined if you do not have a long and accurate credit history.

Moreover, when you have access to credit but you do not use it, the case goes out of your favor. Suppose you are having a credit card locked up in your wardrobe locker for safekeeping, then the case goes against you. You must use your credit card in a responsible manner for building your credit history. If you have a joint loan, keep in mind that only primary borrower would be considered officially not any co-signers or secondary borrowers.

Excessive Debt

Credit unions and banks would let you borrow only up to 40 percent of the gross annual income of the loan applicant. If your debts exceed the 40 percent limit then you need to put in a loan application for a smaller amount.

Tips to Make Sure that Your Loan Request Is Accepted

When your loan request is rejected, you obviously, must look for some other options or learn some new tactics of getting the loan. Here are some tips shared by experts in the industry.

See If You Could Get a Co-Signer

If you have failed to qualify for a debt consolidation loan by yourself alone, you could consider finding a friend or a family member who actually is eligible for the loan and get him to co-sign the debt consolidation loan application along with you. The bank would be approving your application based specifically on the strong financial condition of your co- signer.

Even though this looks like a really easy way out, sometimes it could prove to be dicey. As you have an unstable financial background, at some point or the other, the co-signer is compelled to make some of your payments and this could ruin your relationships. The co- signer would be held responsible for the payment of the debt consolidation loan till it is paid off completely.

Start Living on a Budget

You must plan your spending otherwise; you would be in deep trouble in no time. Your spending must be definitely less as compared to your income and consider building up as much credit as possible to meet up all your expenses. Chalk out a sensible and an achievable budget and stick to it if you wish to eliminate debts from your life.


Some people feel that a debt consolidation loan would magically eliminate all their debts and pull them out of all sorts of financial issues and crises. However, you could come out of a financial crisis only if you are aware of the factors that had actually culminated in your financial mess. You need to stop impulse spending, overspending, making late payments, or even avoid an addiction if that is the root cause of your financial mess. Do some smart planning, chalk out a budget and stick to it and see the difference!

Leave a Reply

You must be logged in to post a comment.