Debt Consolidation

What to Do If You Cannot Get A Loan

Some people, often through unavoidable circumstances such as a medical emergency or an unexpected job loss, cannot get a loan because their credit score is too low. And they might not be able to employ a debt management program, either because their loans are secured loans (house or car as collateral), or because they do not have enough debt.

Avoid continually applying to different credit counseling services until one accepts you.

This puts you at risk of being taken advantage of by a for profit company.

If your credit score is too low to get a loan that is at a lower interest rate than you have right now, or you don’t have a house, or for some other reason, you cannot consolidate, you may have to wait a few months before trying again to get a loan.

First, you may need to improve your credit score. This will help you to qualify for a loan, as well as allowing you to get lower interest rates. To improve your credit score:
•    Pay bills on time. 6 months of on-time bill payments can raise your credit score
•    Don’t automatically close accounts as you pay them off. Part of your credit score is based on how much credit you have available.
•    Don’t open new accounts

As well as improving your credit score, you may want to work on reducing your debt.

This will also improve your credit score and make it easier for you to consolidate. A popular method to pay off debts is to send minimum payments to all of your debts, and choose one debt (either the smallest amount or the highest interest rate) to send any extra money you get. Once that one debt you have focused on has been paid off, use the money you were sending to it, and add it to the payment on the next debt on your list. (So the next debt gets its own minimum payment, plus the minimum payment of the other debt, as well as any extra money you can send to it.) You could also decide not to decrease the amount you send to any debt – even though the minimum payment on a debt will be lower next month, keep sending this month’s minimum payment to it until you get it paid off. Credit card debt especially can be difficult to get rid of. The interest on many cards is compounded daily, so you may want to try to send your payments a bit early, if possible.

If you can’t send the whole payment early, and your credit card company allows multiple payments in one month, send some of the payment early, and the remainder on the due date. This helps cut down the amount of interest you have to pay, and in the end you will end up paying less. There are a number of small ways you can reduce your debt, and once you add them all up, your debt will go down much faster. Try reading books about debt, or joining a debt support group.

Once your debt has gone down and your credit score has gone up, you may be a better candidate for credit consolidation. Of course, by this time, you may find you are handling the debt fine on your own.