Research points that the majority of brokers are acquainted with the purpose of debt consolidation loans and what they imply. Nonetheless, there is a significant number of requests sent to lenders for debt consolidation loans, which don’t fulfill the lender’s guidelines. What determines these general misunderstandings regarding this aspect?
The source of misunderstandings
Before explaining serviceability, there is a common misconception concerning debt consolidation loans. Professionals working in this field indicate that there is quite a fixed generalization according to which debt can be refinanced. The truth is that this assumption is entirely wrong. The source of this assumption is believed to be the multitude of debt-repair organizations broadcasting their services, often making use of the phrase “debt consolidation loan” to explain their expertise. Consequently, this causes the general misconception implying that the term “debt” is somehow linked to some kind of liability.
There are debt-repair agencies that could actually help people dealing with delinquent debts. Nonetheless, debt consolidation loans are provided through banks or other financial institutions, and their purpose is entirely different. Regardless of the fact that a myriad of organisations makes use of the term “debt consolidation loan”, that doesn’t automatically imply that their action and expertise is the same.
The eligibility for obtaining debt consolidation loans is, first of all, settled by the sort of debt and, equally important, by the owner’s conduct of that particular debt. The type of debt will only point the consumer’s credit report, which carries a lot of importance. For instance, permanent use of payday lenders and entries imminently eliminates the option of debt consolidation loan. When it comes to debt consolidation loans, the process of continual confirmation of positive conduct is equally relevant and required as well. When this cannot be proved, specialists note that it is best to reapply in three months’ time.
The purpose of debt consolidation loans
Thus, the question is, if a debt consolidation loan is not created for the purpose of repaying debts, not even delinquent ones, what is its purpose? In more exact terms, debt consolidation loans are designed to help clients to adapt in organising their financial responsibilities, as they need to concentrate on cash flow for the future.
However, due to lack of awareness and information, customers are not aware of their position and what lenders expect of them. Consequently, they wish to get approved for debt consolidation loans that are assumed to be the solution to cash flow problems. The bottom line is that both lenders and brokers should clarify these popular misunderstandings in order to educate customers about debt consolidation loans.