Already helped 9865 people to start a debt free life

What makes you eligible for a consolidation loan?

A low-interest debt consolidation loan is what debtors look for when they decide to consolidate their several existing obligations. However promising it might look, taking out a consolidation loan will require you to meet certain criteria. When you apply for the loan, the lender will thoroughly analyze your credit history and other information on your application to ensure whether you fulfill the following requirements:

• Credit History

Looking at your credit history, the lender will determine how you've handled your creditors in the past. The lender will check whether you made payments on time. Regular defaults and an extremely poor credit score may cause the lender to reject your application.


• A Steady income

A lender tries to gauge is whether the borrower will be able to repay the loan or not. So, one of the first things the lender will look for is whether the borrower has a steady income. The lender will take a critical look at your income to verify whether your income is consistent enough for you to make regular payments on your loan. Some lenders even require the borrower to meet a certain debt-income ratio, that is, the borrower's monthly disposable income should be a specified percentage of their gross income.


• Stability

Next, the lender will look at your stability. Your lender will look at whether you have been living at the same residence for at least the last 2 years. If you have been, then you will be considered stable. If you owe a house, you will be considered even more stable.


• Asset Ownership

Certain lending institutions may require you to be an asset-owner. Though it is never mandatory, lenders are more inclined to loan money if you own an asset, such as a house, a car, etc. If you keep defaulting on your loan or decide not to pay your loan, then lender can foreclose or repossess the asset, sell it at a sheriff's sale and retrieve its payments from the proceeds. A house is the most preferable guarantee for a consolidation loan lender.


• Considerable Equity in your house

If you are looking for a Home Equity Loan or a Home Equity Line of Credit, the lender will look to see whether you have considerable equity in your home. Your house will be the collateral against the loan and the lender wants to ensure that there will be no loss to them if you fail to repay your loan. Thus, your house will secure the loan. The more equity you have in your home, the lower the interest on the loan and the more you will be able to borrow.

While these are the most common criteria that the lenders look for in prospective borrowers, credit lending requirements do vary from one lender to another. So, when you shop for a consolidation loan, make sure you check out all the possible requirements that you need to meet, so you can avoid the chance of your loan application getting denied.