Debt consolidation can relieve some borrowers of the overwhelming burden of high-interest debt. It can also be a psychological victory as it gives borrowers a sense of control back. However, borrowers with fixed incomes may have trouble finding lenders to consolidate their debt. This problem is compounded if the only income coming in is from the government--such as Supplemental Security Income or disability payments. If you have disability money coming in and you need to consolidate debt, you'll need to work with a nontraditional lender.
Pull your credit before you search for lenders. A strong credit score will go a long way when persuading a lender to take you on as a credit risk. Visit AnnualCreditReport.com for a free report. Also, pay for your FICO score--a three-digit number that represents your overall creditworthiness.
Review all of your income. This may just be your disability income coming in. However, you may have sources of revenue that you wouldn't normally count as income--such as rent, alimony, child support or Social Security payments. These income sources can often be used in income calculations. Collect all documentation relating to these.
Think about any unverifiable income you might have. This could be income from under-the-table work (like bar tending or babysitting). Some lenders have "no-doc" programs that allow you to simply add a small amount of income without verifying it.
Start researching lenders. Stay away from local banks and credit unions no matter how strong your credit score and report is. These companies cater to very cut-and-dried customers. Instead, reach out to finance companies (such as Wells Fargo Financial or CitiFinancial). These institutions often finance customers who have unconventional income or credit circumstances.
Apply at two or three lenders. A huge amount of applications results in too many credit inquiries--which will begin to drop your FICO score. Give loan officers copies of all of your income information. This will help them sort through what can be verified, what is considered consistent and stable and what can be used in income calculations.
Review all offers for debt consolidation. If you have strong credit and want to consolidate many debts (which will significantly decrease your monthly outgo each month), some lenders will do business with you.
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