If you want to get a debt consolidation loan there are certain requirements you must meet. Once you apply for a loan, the creditor will take a look at all of the information on your application and review your entire credit history. Some lending institutions will use an automated scoring system, which means you have to have a certain credit score to qualify. Others will have a credit analyst review your information.
Income
If you want to qualify for a debt consolidation loan, the creditor wants to make sure that you are able to pay. She will look at your income, verifying that it is consistent and there is enough income to make the payments. Some creditors want you to have a certain debt to income ratio. Your monthly disposable income may have to be 10 percent to 15 percent of your gross income.
Payment History
A creditor wants to see how you have handled your creditors in the past. He wants to make sure you are paying all of your debts on time. Sometimes one or two late payments could disqualify you from qualifying or it could cause you to receive a higher rate of interest.
Stability
Before giving you a consolidation loan, a creditor will look at your stability. She wants to see that you have been living in the same place for at least two years. She recognizes this as stability. If you are a homeowner this makes you even more stable in the eyes of a lender.
Equity
You need an adequate amount of equity in your home to get a debt consolidation loan. Without a home you can consolidate your debts but the amount you consolidate will be minimal. Lenders do not like to loan large sums of money without security or collateral. If you have $35,000 of equity in your home and you want to consolidate $30,000 of debt you should have no problem.
Home Ownership
Some creditors will relax their standards a little if you are a homeowner. If you decide not to pay they can always foreclose on your home and sell it at a sheriff's auction and use the loan proceeds to pay off the loan. All banks and lending institutions have different credit lending criteria so the requirements can vary.
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