There can be several reasons why you might be denied a Debt Consolidation Loan. Lenders will take a variety of factors into account when making their decision, so it’s important to understand what these are.
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No Security for Debt Consolidation Loan
When you are looking for a debt consolidation loan, the lender will want to know that you have something to offer as security in case you cannot make your payments. Without this security, the lender is taking on greater risk and may be unwilling to lend to you.
Problems With Credit Report and Credit Score
If you have Poor Credit or no credit history at all, this could be one of the biggest factors holding back your approval. In addition to not having much of an ability to pay off high-interest debts like medical bills and student loans over time (which can lead them into default), low FICO scores also make it harder for borrowers to qualify their monthly payments as part of an income-based repayment plan such as IBRs (Income Based Repayments).
Not Enough Income to Qualify for a Debt Loan
Lenders also look into other factors such as employment stability before giving out loans so even having a high-paying job with great benefits isn’t enough if they feel like there might be some risk involved in lending money to someone who doesn’t have steady employment or could lose their job at any moment.
Too Much Debt
It’s no secret that if you have a lot of debt, your chances of getting approved for a loan are slim. Even though people use debt consolidation loans to get out of debt and improve their financial situation, the lending company still has to make sure that you can afford them. If you don’t have enough room in your budget or monthly income after paying off all necessary expenses each month then there is a good chance that your application will be denied.
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