If you need it to pay off your debt, you must know that providers of debt consolidation loans have their qualification requirements as to whether you’ll be approved or not just like bank and other financial institutions. The following is a quick guide on what the companies are using in reviewing your loan application.
Will You Qualify for the Debt Consolidation Loan?
There are many companies that make use of a scoring system for ranking your credit, while others use analysts to determine if you qualify for the debt consolidation loan or not. But whether or not they’re using these systems, the following are the basic requirements:
The loan company wants to ensure if you’re capable of paying the loan back. Many of them will ask for proof of income in order to determine if you have a steady and stable job to pay them back. They also want to make sure that you’re making enough money to cover the monthly payments. Additionally, they may require “debt to income ratio” and 10-15% disposable income monthly.
Many of them may even look for a high credit score when reviewing an application. However, it does not mean you should have a perfect credit score or standing before applying for a debt consolidation loan. Still, many of them will determine if you qualify within their required credit threshold, which ranges between scores that determine your credit worthiness. They use it to evaluate potential risk of a borrower. The lower is the risk for them if they’d approve borrowers with a high credit standing.
More likely than not, the loan company wants to determine if you’re always relocating or you’re staying in one place of residency for at least two years. They will also ask the length of time you’ve been working in your current company.
Collateral is another important requirement of loan companies that are reluctant to give large amounts of money to someone without it. So without even saying, the loan company would want enough home equity in order that you qualify for a debt consolidation loan. Now if you don’t have enough collateral, such as home equity, it would be impossible to get a huge sum of debt consolidation loan.
That said owning a home is almost always a sure way of qualifying for just any types of loan. It plays a significant role regarding your chances of being approved for the application.
As with home collateral, the loan company will just foreclose the property and then sell it to use the proceeds to settle your loan.
This is one of the basics that the loan company looks for when reviewing an application, looking into your history in terms of paying back your creditors. Do you settle monthly payments on time? Do you have a good payment history in paying off debts and bills?
Choosing a Debt Consolidation Loan
So no matter your situation, you must do your homework to compare different lending companies before submitting an application. Also, take note that a loan company may have additional requirements. Nevertheless, research and compare the available debt consolidation loans and figure out which among them is suitable based on your current situation (and on interest rate, period of repayment, etc).