Debt agreements offer a very good debt solution to borrowers who are experiencing financial hardship and have significant unsecured debts. However many borrowers despite being unable to qualify for a debt consolidation loan are unwilling to consider a debt agreement. They are concerned that a debt agreement would adversely affect their credit history and their ability to borrow in the future.
While a debt agreement does have this impact, one always needs to consider what alternative debt solution they may accept or be qualified for. After all to qualify for a debt agreement you must be insolvent, and anyone who is insolvent will not be able to qualify for any form of finance, secured or unsecured.
There are times when a debt agreement offers the best alternative for debt consolidation.
Bad Credit, No assets, High unsecured debts
If you have unpaid debts, paid defaults, a history of asset repossession, hold no assets with available equity and high unsecured debts, you will not qualify for a debt consolidation loan. Therefore in declining to consider a debt agreement solution, you must consider what other debt reduction strategy you will be able to implement.
Borrowers with high unsecured debts and no assets that can be used to secure a new consolidation loan against will have a difficult time making any headway with their unsecured debts without a debt agreement.
Income too low to borrow
Borrowers whose income is too low to qualify for a new consolidation loan will need to consider other debt consolidation strategies. If you have some assets to sell to pay down debts, that can be very effective.
However where there is low income and no assets to sell, a debt agreement may be the only strategy that will prevent bankruptcy (short of financial assistance coming from your family or friends).
Can’t qualify for a debt consolidation loan, considering bankruptcy
If you have tried several times applying for a consolidation loan and were declined on the basis of income, credit history, or any other reason you may need to consider a debt agreement as the only possible solution short of proceeding with bankruptcy. While both bankruptcy and a debt agreement will have adverse credit history impact on the applicant, most likely your credit history is already not intact if you are insolvent.
Do you qualify for a debt agreement?
Just because you decide to apply for a debt agreement does not guarantee that the company will accept your application. There are limits with respect to your debts, assets and income that determine if you are able to apply.
For the debt agreement to proceed a majority of your unsecured creditors need to accept your debt payment proposal. In applying for a debt agreement you do risk that your creditors may decline and simply push you into bankruptcy. This is why we would not suggest that you consider a debt agreement unless your situation is such that you have pretty much ran out of other debt consolidation options.