For people struggling with large amounts of unsecured consumer debt, consolidation loans are one of the best avenues for bundling payments to multiple creditors into a single debt — usually one that comes with a significantly lower interest rate.
But getting this kind of loan can be a bit of a Catch-22: if you need a consolidation loan, it’s because you’re struggling with your current payments, which in turn means you probably have bad credit. But if you have bad credit, it’s nearly impossible to secure the kind of loan that would allow you to consolidate your current debts.
The good news is that just because you’ve been rejected for a consolidation loan doesn’t mean you need to start thinking about a consumer proposal or bankruptcy. There may still be alternatives to these more drastic financial measures, and the first step toward figuring out what they might be involves getting in touch with certified Credit Counsellors from non-profit credit counselling agencies who can advise you about your options.
Rejected for a Loan? All is Not Lost
People get rejected for consolidation loans for many different reasons, the two most common being bad credit and not holding enough in assets to put up the necessary collateral.
While it can feel crushing to face this kind of rejection, it is important to bear in mind that it’s usually for a good reason. If you haven’t taken charge of your finances, another loan — even when it’s at a lower interest rate — can actually lead you further into debt and make it even harder to get out.
To be done right, consolidation should be one part of a larger strategy to get your financial house in order, and if you’re really struggling with your payments and you’ve been rejected for a debt consolidation loan by a bank or other financial institution, you may still be eligible for a debt consolidation program.
How a Debt Consolidation Program Works
On its surface, a Debt Consolidation Program can look a lot like a simple consolidation loan. But it is different in two key ways: first, you enroll in this kind of program through a certified Credit Counsellor from a not-for-profit credit counselling agency who doesn’t extend a loan to you but rather works as a mediator between you and your existing creditors. Second, these programs are based on a more holistic approach in which consolidation is supplemented with personalized financial help.
Because certified Credit Counsellors work on your behalf to help you come to a fair arrangement with your creditors, through a Debt Consolidation Program you may end up paying little to no interest on your existing loans. You still only pay a single monthly payment, but you also get the support of debt management experts who can help you chart a course to a more sustainable financial future.
All-too-frequently, unsecured debt keeps ordinary people from fulfilling their potential and making the most of their money. If you have been rejected for a consolidation loan but don’t want to sign a consumer proposal or file for bankruptcy, there are still options available.
Through certified Credit Counsellors, you may be able to negotiate with your creditors to create a more sustainable framework for repayment, one that won’t force you to take on any further loans and can get you back on track financially.