See if you qualify

If multiple banks have turned down your debt consolidation loan then know that you aren’t alone. It’s quite common for banks to reject loan applications especially when someone’s profile doesn’t meet their eligibility criteria. It’s difficult to qualify for such loans especially when you have a poor credit score or a high balance. If you’ve done all your research on which banks offer debt consolidation loans and still can’t qualify then don’t worry because there are a lot of other alternatives you can try. In order to regain control over your finances and manage your debt, you don’t specifically need a new loan. 

Today we are going to discuss it all in detail including what you should do after your bank declines your loan application and what possibly can help you manage your debt without being overwhelmed. 

1- Understand Why Your Loan Was Rejected 

Before you start exploring other alternatives, it’s important to first understand why you were denied a debt consolidation loan in the first place. Some common reasons include; 

It’s important to ask your lender about the reason behind rejection, in fact, they are required to do so by law. Once you know where the problem lies, it’ll be easier for you to address it accordingly. 

2-Try Working With A Non Profit Credit Counseling Agency 

If you are struggling with debt and no bank is willing to give you a consolidation loan then another effective alternative is to work with a professional credit counseling agency. A professional counselor won’t just review your financial picture but will also help by providing you possible solutions when you are stuck with debt. 

A reputable credit counseling agency will help devise a Debt Management Plan (DMP) for you. With it you’ll be able to; 

What makes DMP a more suitable option is that you don’t need any good credit scores or a new loan to manage your existing debt. It’s the best option if your bank has denied you a consolidation loan. 

3-Debt Settlement

If you are falling behind your payments and managing debt is becoming overwhelming for you then try debt settlement. This process involves negotiating with your creditors to reduce the total amount of debt you owe and in return you pay them a lump sum as per the decided agreement. 

You can either settle your debt with your creditors on your own or hire a debt settlement agency to negotiate on your behalf. However, there are some potential downsides to this process, including; 

You should opt for debt settlement if the only other alternative left is bankruptcy. People use debt settlement as a last resort when they are badly stuck with debt and can’t qualify for a consolidation loan either. 

4-Try Applying For A Secured Loan 

If an unsecured consolidation loan is off the table for you then try applying for a secured loan instead. It’s one of the best alternatives to bank loans. This option is suitable for those who own a valuable asset like a car, a house or a savings account. For a secured loan, you have to provide collateral to reduce the lender’s risk. 

Pros 

Cons

Only use this option if you are confident that you’ll be able to make your monthly payments on time. Getting a secured loan will only work if you practice financial discipline because if you miss your payments or fail to pay off your outstanding balance then you’ll have to give up your collateral to the lender. 

5-Opt For Balance Transfer Credit Cards If You Are Eligible 

If you have a solid credit score or if you are working hard to improve it then applying for a balance transfer credit card is a smart move to get rid of your current debt. What happens is that these cards come with a 0% APR introductory period of 12 to 21 months. You can use the funds to consolidate your smaller debts without worrying about any interest. 

However, it’s just a short term solution because once the introductory period ends, you’ll have to deal with higher interest rates. Moreover, to qualify for such a card, you need a credit score more than 680. 

6-Bankruptcy – If It’s The Last Resort

If managing your debt is becoming impossible and you are constantly drowning in it then opt for bankruptcy as one of the debt relief solutions if none of the other above-mentioned methods work. It should be used as your last resort because it can seriously impact your credit but at the same time, it can; 

If you are planning to file for bankruptcy, it’s best if you work with a professional attorney to understand whether you should go for Chapter 7 or Chapter 13 bankruptcy. 

7-Start Working On Improving Your Financial Health 

No matter which option you choose, to regain control over your finances and to build a strong and stable financial future, you must make consistent efforts. Here’s what you can do to get real-time results; 

Don’t lose hope when your bank rejects your loan application. Instead, learn why you were denied a loan, work on your weaknesses and stay persistent with your efforts to get your finances back on track. 

Key Takeaway 

Getting denied for a debt consolidation loan from a bank might feel very discouraging but know that it’s not the end of your financial journey. In fact, it’s a chance for you to work on your credit, explore different more effective alternatives and to adopt better financial management habits. You can opt for multiple other options like credit counseling, debt settlement or careful budgeting in order to move forward towards a better financial future. 

What’s more important is to understand that becoming debt-free and attaining complete financial freedom is no magic and it won’t happen overnight. If you want to see actual results then you’ll have to stay consistent with your efforts and adopt a financially responsible lifestyle. The process will take some time but with the right strategies and approach, you’ll be able to achieve your goals. 

FAQs

Q1. Why Did The Bank Reject My Debt Consolidation Loan Application?

Banks can reject your debt consolidation loan applications due to various reasons including a poor credit score, a high debt to income ratio or an unstable income. Sometimes, recent late payments or too many hard credit inquiries can also lead to rejection. Once you’ve been rejected, it’s important to inquire about the reason and the bank is supposed to give you an explanation by law too. When you know the reason why your loan was rejected, it’ll be easier for you to directly address the issue. 

Q2. Can I Consolidate My Debt With A Bad Credit? 

Yes, you can consolidate your debt with a poor credit score because when it comes to lending, banks aren’t the only option. In fact, you can try online lenders and credit unions who specifically deal in bad credit loans. The only downside here is that you won’t be able to secure low interest loans but if you still manage things strategically, you can become debt-free with the right plan! 

Q3. How Long Would It Take To Rebuild Credit After Consolidation Loan Rejection?

The timeline varies from person to person but in general, if you make timely payments, keep your balances low and adopt responsible financial habits then it would take you around 6 to 12 months to see a noticeable difference. The key here is to stay persistent and wait patiently. 

If banks have closed their doors for you in this difficult time then there are still paths to debt relief solutions. Explore all the possible and effective options with us at Mountains Debt Relief to regain control over your finances.