You’d like to consolidate your debt because you’re swimming in it. When you applied for a consolidation loan, though, it wasn’t approved. Your head is just above the debt, and you’re desperate. Why wasn’t your loan approved? Allow Symple Lending to explain.
The Big Three
Lenders have a reasonable expectation of having their money repaid. They look at three things that tell them whether or not you’re a good risk: income, credit rating, and amount of debt.
Low Income
Both you and your spouse work two jobs. However, lenders deem your income too low to repay a loan. After all, if you haven’t repaid the loans in your pile of debt, what makes them think you’d repay theirs?
How To Handle Low Income
If you talk to a Symple Lending expert, he’ll tell you to make a budget. Once you make a budget, you have to live within it. Using credit cards for anything at all defeats the purpose.
List your income in one column. List your debt in another column. In the third column, list your paydays. Pay off the oldest debt first. On each successive payday, pay off a debt. If it takes a couple of months to pay one debt, that’s fine. It’s paid off, and that’s the goal.
Amount of Debt
No one plans for emergencies. When ER trips happen, we usually don’t have any money on us. We end up with a stack of medical bills we can’t pay. Then comes the insurance payments, the mortgage, and the beat goes on. Lenders look at the list of debt on your credit report and wonder how you’ll repay yet another debt.
How To Handle Amount of Debt
You’re making every effort, through your budget, to reduce the amount of your debt. However, lenders look at your income-to-debt ratio, which means how much money you make monthly as opposed to how much you owe. For example, you make $3,500 per month in income. You pay out $1,500 to pay off your debt.
This makes your income-to-debt ratio 42 percent. Lenders want to see an income-to-debt ratio of only 36 percent or one-third of your income. If it isn’t, you have too much debt. Get on that budget and pay it off.
Credit Score
Every last person lives and dies with a credit rating. If you talk to an expert, he’ll explain that credit scores tell lenders everything about you. Do you manage money well? Do you live within your means? Do you repay loans on time? If so, then you’re a good risk for a loan.
How To Handle Credit Scores
By now, you’ve paid down a considerable portion, if not all, of your debt. You’re not spending money on new debt. As these things happen, your credit score suddenly looks better to a lender. Well done, and congratulations!
Final Thoughts
Symple Lending wants you to have the money to pay for your needs. We’ll be glad to walk you through the steps to improve your odds of getting that money. Call us or drop by the office to learn more about it.
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