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Tips and resources for debt consolidation with high debt to income ratio
Wednesday, Oct 17, 2007
Question: I can't get a consolidation loan because of too much revolving debt-to-income ratio. I'm not behind or late on any payments, but I'm not getting ahead either. We almost have to use our credit cards to live. Our credit history even shows we pay our bills religiously. We refinanced our house 4 years ago and not much equity built up. My wife works 1 job and I have 2. We have 3 kids, mortgage and 2 car payments, as well as loans and credit cards. Can anyone help?
Answer: Thankfully, I can think of several possible solutions to your problem, but which option is the best for you will depend on how old the debts are, if you own property, and how much money you can afford to allocate to your debts on a monthly basis. If you follow the links below, I can put you in contact with a company that may be able to assist you in resolving these debts.If you want a free debt consultation with one of Bill's approved debt help partners, click here: Debt Help
Debt consolidation loan
If you own a home, a secured debt consolidation loan may be right for you. This type of loan is essentially a home equity loan which is used to pay off your other creditors. Secured consolidation loans help many consumers by consolidating all of their debts into a single monthly payment with a lower interest rate and payment amount. Also, be careful before you borrow money against your home to pay off credit cards and other unsecured loans; you will be converting what was previously unsecured debt into secured debt. This could cause you problems down the road if for some reason you are unable to make your payments, or if life circumstances force you to file bankruptcy, as you may not be able to discharge the secured debt as you would unsecured debt. However, secured debt consolidation loans work for many people, so this is an option to consider
carefully. The Bills.com Savings Center is a great resource to help you find a lender for this type of loan.
Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan page and find a loan that meets your needs at: Free Mortgage Refinance Quote
Credit Counseling
Another option to consider is a Consumer Credit Counseling Service, or CCCS. CCCS companies offer numerous services, such as financial counseling and budget planning, as well as Debt Management Plans (DMPs). In a DMP, the CCCS would arrange a new payment amount with each of your creditors, usually based on a reduced interest rate. You would then make a single monthly payment to the CCCS which would distribute the funds to your creditors, based on the new payment amounts. There are several drawbacks to CCCS, though. First, depending on your creditors, it may not be able to reduce your monthly payments enough to improve your financial situation. Second, it may have a negative impact on your ability to obtain a loan, so you may not wish to enter into a DMP if you anticipate any large purchases, such as home or an auto, in the near future. Third, the average DMP takes around five years to pay off your debts, so you must be willing and able to commit to a long-term repayment plan.
Debt Settlement
You may also want to consider the services offered by debt settlement firms. Rather than making monthly payments to your creditors, these programs negotiate lump sum settlements with your creditors,
Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan page and find a loan that meets your needs at: Free Mortgage Refinance Quote
Credit Counseling
Another option to consider is a Consumer Credit Counseling Service, or CCCS. CCCS companies offer numerous services, such as financial counseling and budget planning, as well as Debt Management Plans (DMPs). In a DMP, the CCCS would arrange a new payment amount with each of your creditors, usually based on a reduced interest rate. You would then make a single monthly payment to the CCCS which would distribute the funds to your creditors, based on the new payment amounts. There are several drawbacks to CCCS, though. First, depending on your creditors, it may not be able to reduce your monthly payments enough to improve your financial situation. Second, it may have a negative impact on your ability to obtain a loan, so you may not wish to enter into a DMP if you anticipate any large purchases, such as home or an auto, in the near future. Third, the average DMP takes around five years to pay off your debts, so you must be willing and able to commit to a long-term repayment plan.
Debt Settlement
You may also want to consider the services offered by debt settlement firms. Rather than making monthly payments to your creditors, these programs negotiate lump sum settlements with your creditors,
frequently reducing your debts by 50% to 60% of your principal balances. These programs usually take only 2-3 years to complete, so this is a good option for many people to rid themselves of debt in a relatively speedy manner. In many cases they can also reduce your monthly payment toward your debt. There is one major drawback to debt settlement programs, though they will significantly damage your credit while in the program and for at least a year or two afterward. However, if you are currently unable to afford to pay your creditors, the hit to your credit may be worth the benefit of ridding yourself of credit card debt. Because of your financial difficulties, you may want to stop focusing on the importance of your credit score. Although you may have a good credit score, because of your low income and large debt amount, most lenders will likely see you as a high risk borrower, and may not be willing to extend you credit, so your actual credit rating may not good as you believe. A debt settlement program is probably the fastest way to resolve you debts, and once you repay your debts, you should be able to rebuild your credit score through careful management of your credit accounts.
Hopefully, one of the several options I have described above may be able to help you. I encourage you to explore the Bills.com Debt Help page to read more about these and other options available to you.
I hope this information helps you Find. Learn. Save.
Good Luck,
Bill
www.bills.com
Hopefully, one of the several options I have described above may be able to help you. I encourage you to explore the Bills.com Debt Help page to read more about these and other options available to you.
I hope this information helps you Find. Learn. Save.
Good Luck,
Bill
www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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1. Posted by Nelle on Wednesday 12th March 2008 07:27
I can't get a consolidation loan because my debt to income ratio is too high. Unfortunately, I am behind on my credit card payments and I do have two judgements against me. One is a hospital bill that is up to date on payments and another that just happened because of my tenet not paying his condo fees. My mortgage is up to date, but I am still having problems with being approved for a debt consolidation loan. I have contacted CCCS, but the payment is too high and we can't afford it. I work 2 jobs, my husband works 1, and we have no kids. Can anyone help?
2. Posted by Frederick on Wednesday 12th March 2008 07:48
You sound like you are in a situation similar to many people in the USA... too much debt, bad credit and no one will give you a chance. If credit counseling payments are too high, and you want to avoid bankruptcy, the ideal solution for you might be Debt Resolution or Negotiated Debt Settlement. The benefits are very low payments and big savings. The downside is that it can impact your credit rating negatively, but since you already have bad credit it might be worthwhile. Check out: Freedom Debt Relief www.freedomdebtrelief.com 1-800-544-7211 Ask for Frederick :)
3. Posted by Jon on Tuesday 10th March 2009 19:30
I have an avg of 780 credit score by all 3 major agencies, however due to a job change and the economy, my income to debt ratio is very low. I am not in real trouble now and don't have huge credit balances, but they will continue to grow for at least a year until my income improves. I need a long term consolidation loan to get me thru the next few years. What are your suggestions - Jon
4. Posted by Bill on Wednesday 11th March 2009 08:30
I think that it is not a bad idea to try to refinance, particularly if you can qualify for a conforming loan (rates are just crazy low for a 30 year fixed rate today) and with your excellent credit there is a good chance that you can get a good loan. Bills.com has pretty good lenders if you apply through our savings center who can get you some free quotes on what a refi would look like, even with a high debt to income ratio.
5. Posted by barry on Tuesday 12th May 2009 05:12
my daughter is getting married in june and I need a credit card, unsecured, to use for the caterer which has $2000 or more on it. I am having issues getting a card becasue my debt to income ratio is too high. I have credit scores of between 720-760 and have never been late o any payments. I have no room on any of my other cards whci are all maxed and have no room on equity on home. How do i find a card for my needs ..
6. Posted by Bill on Tuesday 12th May 2009 12:10
Here at Bills.com we try to advise people to stay away from credit cards and therefore I do not know of many resources to apply for credit cards. I have heard about www.creditcards.com, you can try there. You might want to think twice about getting deeper into credit card debt, as you already state that you have maxed out the ones that you have.
7. Posted by barry on Tuesday 12th May 2009 13:28
what do you know about the Obama plan that is suppose to help homeowners who refinanced and was approved for more then what home was probably worth..
8. Posted by Bill on Tuesday 12th May 2009 13:58
We have not heard much about it from actual people who have qualified for it, the terms seem to be pretty tough to meet. You can see if you qualify, by vising this website: http://www.makinghomeaffordable.gov/