When you decide to reduce your debt using debt consolidation, your next step comes in deciding which type of consolidation to use. All three ways – credit card, loan, and debt management program require four main qualifications.
Debt Consolidation Requirements
Qualifying for a debt consolidation method means meeting the criteria of the financial organization that offers it. Although exact criteria vary, regardless of the method you want to use, you’ll need proof of regular, monthly income. For a debt consolidation loan, such as those offered by Symple Lending, or a credit card, you’ll also need a strong credit history and fair to good credit score. Some loan programs may require equity in a physical asset, such as a house.
If you consider a debt management program through a non-profit, you won’t need a specific credit score. Any person in debt can participate in a debt management program, according to American Consumer Credit Counseling. You will need to sign an agreement that says you’ll cancel all of your credit cards. The contract for these non-profit programs includes a stipulation that you can’t open new credit cards or loans while in the program.
What Paperwork Do You Need?
Every requirement differs in its documentation. When you apply online, you may have to scan documents to upload them. If you apply for a loan from a local bank or credit union, you’ll probably have to meet with a loan officer in their office to complete the application and provide paper documents. Here’s what each term means you’ll need to provide.
Proof of Income
Provide pay stubs to prove your monthly income or paperwork proving your monthly retirement income and copies of your income tax forms. Copies of the report that accompanies a Social Security deposit counts as proof of income, as does the monthly report for an annuity or pension disbursement. Alimony and child support, disability income, and workers’ compensation payments fall into this category, too.
Credit Score and History
Financial institutions run your credit using your Social Security number to obtain your payment history with creditors. The longer you’ve had credit and the more reliably you’ve paid, the better. That’s because your credit score may have just dropped due to an accident or job loss that interrupted your payments. A long history of paying on time and paying more than the minimum payment shows your financial stability.
Equity
Larger consolidation loans require collateral. To consolidate large medical bills and credit cards, for instance, the financial institution may require that applicants own a home. They may access home equity to offer a loan based on it, such as a home equity line of credit (HELOC). You provide your mortgage documentation or deed to your home to provide your ownership and equity. Explore potential savings with 2nd mortgage rates and use your home’s value to unlock financial flexibility and consolidate your debts effectively.
What to Do if You Don’t Qualify
For various reasons, some individuals may not qualify for a loan. According to Investopedia, many credit card companies and lenders will turn down an applicant with a high debt-to-income ratio (DTI). DTI refers to the percent of your monthly gross income paid to debts. If you can’t qualify for a loan or credit card, enter a debt management program through a non-profit. This method lets a person reduce the amount owed and pay it off quickly.
Get Started Today Getting Out of Debt
If you’ve noticed your debts piling up, don’t delay. Contact the experts at Symple Lending for a debt consolidation loan. Get out of debt before the problem escalates to the point where you need a debt management program.
