Can You Get an Unsecured Loan While Enrolled in a Debt Consolidation Program?

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Can You Get an Unsecured Loan While Enrolled in a Debt Consolidation Program?

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We have debt that we didn't enroll in our debt consolidation program. One of them is a line of credit through our bank. 

Every time I stop in the bank to take are of some business, the teller asks if we would consider talking to a banker about possibly doing something to lower the interest rate on that account. I don't know if there's some flag that pops up and notifies them that they could actually do something to improve the interest rate, or if they are just trained to ask that question for every customer.

Throughout the last four and a half years, I've always given some answer deflecting them away from the subject such as telling them we're already talking to a banker, or that I don't have time right now and I'll call to make an appointment.

The truth is, I knew that with our financial situation there wasn't a chance that we could do anything with that line of credit.

But late last year, with the finish line of our debt consolidation program within sight, I decided to roll the dice and actually meet with a banker. 

The banker told me the interest rate they would offer on a new line of credit was half what we currently were being charged on our line of credit.  

Suddenly I extremely interested in seeing what he could do for us.

I was very upfront with the banker, telling him everything about our credit card debt, and our enrollement in debt consolidation plan. After reviewing our information, including our income and debts he thought we had a good chance at being able to get the interest rate lowered on our line of credit.

A few days later, he called with bad news. Our application was declined.

He explained that what were actually doing was applying for a brand new line of credit, with the current terms including a lower interest rate. The new line of credit would be used to pay off the old line of credit. 

They would not issue us a new line of credit because we had creditors that were being managed by credit counseling.

I was honestly stunned. 

We weren't declined because of an unfavorable debt to income ratio, lack of income, or bad credit. Even though we could clearly demonstrate the ability to pay the monthly payments, and the closing of the old line of credit would result in a zero increase in our total credit, and the result would be a lower monthly payment which would actually decrease the chances of us becoming delinquent on the payments, we were declined.

The banker suggested we come back and try again once our program was complete. 

We most certainly will, as the current line of credit is structured like a credit card with a minimum monthly payment, and no term of completion. We want to convert it into a personal loan which will give us a finite term to pay off the debt.  

With the end of our program coming up quickly, we'll be back soon.

Related Links:

Can You Refinance Your Home When Enrolled in a Debt Consolidation Program?

Part 2 -Refinancing Our Home While Enrolled in a Debt Consolidation Program

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Travis Pizel, debt management plan customer with leading provider of debt relief, CareOne Services, Inc. Travis Pizel

Travis is a contributing writer for the A Straight Talk on Debt blog. He is also a very active member of the CareOne community forums. Travis is currently enrolled in a CareOne Debt Management Plan (DMP). Travis candidly shares his personal journey to pay off his debt and the tips he's learned along the way. As a father and husband he provides a unique perspective on balancing debt, finances, and family in Minnesota. You can also read more from Travis on the Enemy of Debt blog, where he is a featured blogger. Compensated Blogger for CareOne Debt Relief Services.

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You can follow Travis on Twitter @DebtChronicles


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  • Thanks for sharing this useful information sharing with us. Really done a great job!!

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