How Can I Qualify for a Debt Consolidation Loan?
Knowing the advantages that you can get from debt consolidation if you have determined that it is the best debt relief approach for you, you may need to assess your situation and see if you qualify for Debt consolidation.
In general, there are points to consider in determining your qualification in getting a debt consolidation loan. Though you can still get a debt consolidation even with poor credit as well as debt settlement, it is still unlikely for someone to qualify. In fact, various factors are taken into consideration when you apply for a debt consolidation loan. Therefore, it is a must for you to get pertinent information about these factors.
Factors to Consider in Qualifying for a Debt Consolidation Loan
There are certain criteria to consider for you to qualify in a debt consolidation loan. These factors are as follows:
The Kinds of Debts
Generally, you can only incorporate consumer debts that are distinguished particularly as a consolidation loan. However, you may add other protected debts when utilizing your second mortgage known as HELOC to settle your existing consumer debts.
Your Credit Score
It would be easier for you to qualify for a debt consolidation loan if you have a good credit standing. If you have a low credit rating, it may require a guarantor or co-maker for you to get a loan. However, if your income is adequate to pay the minimum payments each month, you are likely to be accepted. In cases wherein your score is extremely low, a consumer proposal or bankruptcy might be your only hope.
Debt Service Ratio
In terms of determining your qualification for a debt consolidation loan, most lenders will look at your debt service ratio. Debt service ratio is the percentage of your gross income every month that is essential to make several of your minimum payments for both protected and unprotected consumer debt. For instance, if your monthly gross income is $4,000 per month and your debt payments total to $1500 to remain up to date on your payments, your debt service ratio is calculated as 37.5%.
Furthermore, according to finance experts, you must NOT have a debt service ratio greater than 35%. If your ratio exceeds the acceptable percentage, lenders will be unwilling to approve your application for a debt consolidation loan. In this case, your choice is to look for another debt relief solution that you may be qualified for, such as a credit counselling or debt settlement.
Get the Appropriate Debt Relief Solution
Choosing which debt relief option that’s right for you is not easy. You have to consider several factors before making a decision. In most cases, people who decide themselves without evaluating their financial status end up failing. Thus, it is beneficial to get expert advice and guidance. To get a piece of friendly and honest advice, simply follow this evaluation form.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
|2||Credit card 1||$6,812|
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.