When people begin to experience financial difficulty, they often look at debt consolidation loans as a way to solve their debt problems.
They do this in an effort to lower their interest rates and combine all of their payments into one manageable monthly payment. For some people, doing this is a good idea. Here we outline the top 5 reasons why people are declined for debt consolidation loans.
Financial institutions often ask for security or collateral when applying for a debt consolidation loanespecially when someone is having difficulty managing all of their payments. They want to ensure that no matter what, they will get the money back that they have lent out. There are many credit report and credit score issues that can prevent people from being approved for debt consolidation loans. High balances owing can compound this problem.
Usually a debt loan payment costs more each month than paying just the minimum payments on credit cards. By the time someone realizes that they could benefit from a consolidation loan, they may only be able to make the minimum payments on their credit cards and not a penny more.
Consolidation loans cannot be paid off over a long period of time unless they are secured by your home this would be called a second mortgage. Consolidation loans are usually amortized over 3 to 5 years.