Question: I am plan on getting a consolidation loan from my credit union to consolidate and hopefully, eliminate all outstanding credit card debts. My credit is good although I’ve had a couple of late payments here and there (extenuating circumstances; moving, etc.) but nothing worse than that. My question is: When I apply for a loan, is it “favorable” to include a personal statement explaining my current situation and what I am trying to accomplish? I want to explain to the loan officer that I intend to cut up all my credit cards once the loan is approved so that there will be no possibility of me procurring any more debts. Otherwise, I don’t think they will approve my loan due to my high income-to-debt ration. Thanks in advance.
Answer: I wouldn’t say anything right now unless it is a required part of the application. With most debt consolidation loans, your lending institution will already know that you have a high income-to-debt ratio (thus you need the loan) and will take that into account. If they are worried that you will run up your old accounts and then not be able to repay the new loan, they will probably require you to close the accounts.
So for now, I would wait for action on their part. If you were turned down, you might then explain to the loan officer that you intended on closing the accounts and that you agree to do so, etc. Just fill out the loan application and provide only the information it requests. If there is a problem getting the loan, you then should discuss the matter with one of your credit union’s loan officers. In short, if the loan officer who processes your application has no concerns about giving you a loan, why bother providing that person with details that may not be necessary and may, in fact, cause the loan officer more concern than if you didn’t include the information.
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