Exploring Your Options After Being Denied a Debt Consolidation Loan
Receiving a denial for a debt consolidation loan can be a discouraging experience, but don’t worry, you still have options.

While the idea of a simplified way to manage debt payments and improve financial health is appealing, debt consolidation loans are not the best solution for everyone.
Take a deep breath, and consider some other alternatives that may work better for you.

Top Actions to Take if You’re Declined for a Debt Consolidation Loan
If you recently applied for a debt consolidation loan and were declined, don’t panic.

There are a few things you can do to get back on track and elevate your chances for approval in the future.

Find out why you were declined

Debt consolidation lenders don’t turn down loan applications without a sound reason. There are three common reasons why people are denied: lack of income, too much debt, and poor credit scores. Knowing the why behind the decline will help you understand how to improve your financial situation before applying for another loan.

Low income

Debt consolidation lenders need to see proof that you can afford to pay back the loan. If your current income level is too low, they may not think you can keep up with the monthly payments. Asking for a smaller loan won’t help, so explore other options like boosting your income or seeking a co-signer.

Too much debt

If you’re already deep in debt, a lender may be hesitant to give you more. Be sure to let them know the purpose of your loan, as they may be more willing to offer a personal loan if it’s for debt consolidation. Consider finding a lender that specializes in debt consolidation, as they may be more understanding about your financial situation.

Poor credit scores

Your credit score is a critical factor in determining your creditworthiness. If your score is low, it indicates a higher risk for the lender, and they may turn down your loan application. While there aren’t many quick fixes for low credit scores, you can try to negotiate a higher interest rate with your lender or look for ways to improve your credit score in the long run.
Managing Debt:

Creating a Budget and Paying it Off Strategically

If you are not eligible for a debt consolidation loan, you need to find an alternative solution. Start by creating a budget to manage your finances. Use a spreadsheet to list all of your monthly income sources and deduct fixed expenses, such as rent and car payments, as well as variable expenses like utilities and groceries.

With any excess money, you can either create a financial buffer or allocate it towards paying off your debts. By paying more than the minimum monthly payment, you can reduce the amount of money you pay in interest and pay off your debts sooner.
There are two approaches to paying off debts: the “debt snowball” and the “debt avalanche.” The debt snowball involves identifying the debt with the lowest total balance and paying it off first, while continuing to make minimum payments on other debts. This method frees up more of your income to pay off the next-lowest debt, creating a snowball effect.

The debt avalanche, on the other hand, involves identifying the debt with the highest interest rate and focusing on eliminating it first. Although it may take longer, the debt avalanche saves you the most money over time since it removes your highest sources of interest first.
Now that you have a better understanding of managing debt, ask yourself if you can tackle it on your own or if you need outside help. If you need assistance, remember that help is always available with just a phone call.

Improving Your Chances of Debt Consolidation Approval

If you don’t get approved for your first debt consolidation loan, don’t give up hope. Re-applying may be the best solution for you.
Before you do that, take some precautions. There are three main reasons why people usually get turned down for debt consolidation loans. The first is insufficient income to keep up with payments, the second is too much debt, and the third is a low credit score.
There are solutions for the first two issues. If you’re not making enough money, consider finding a higher-paying job or supplementing your income in other ways. If you have a large amount of debt, focus on paying it off by cutting out non-essentials.

Raising your credit score, on the other hand, can be more challenging. You cannot erase bad debt overnight, but there are ways to speed up the process.

Start by paying all your bills on time. Late payments are one of the most common reasons for low credit scores. If you delay paying your bills long enough, your creditors may engage collection agencies. These agencies are detrimental to your credit scores.

Secondly, reduce your debt as much as possible. Lowering your debt is a good idea in general, but it also plays a significant role in your credit score. Your credit utilization ratio indicates how much of your credit is available for use. The higher it is, the more harmful it is to your credit score. Conversely, the less you use, the better your credit score should be.

Thirdly, avoid changing the way you use your credit. Opening and closing credit accounts can hurt your credit score, as can certain types of credit checks. If you have the self-discipline to keep them open without running up a tab, only keep unused credit cards.

Lastly, be patient. You can’t rebuild your credit score overnight, particularly if you have negative marks on your credit report such as a bankruptcy or foreclosure. These items remain on your credit report for years and can significantly reduce your score, even if they are the only things currently counting against you. Once they are removed from your report, your score will improve significantly.

As your credit score gradually increases, you’ll be better prepared to reapply for a debt consolidation loan. If you are approved the second time around, that’s fantastic! If not, there are other alternatives to consider.


Rely on Reliant. Contact us Today to get the help. 407-789-1447