This applicant actually does not realize that he is just on the edge of having a bad credit rating. While he has not missed any payments as of yet and has not been late on his rent, utilities or his credit card payments, he may soon be in that situation. As soon as he misses a payment, even if he is late for one, his credit rating will tank even further. With five credit cards all at their maximum levels most lenders will consider him to be high risk.
He has been using one credit card to pay off another credit card. In this scenario, he applies for a new credit card. They give him an interest free period if he transfers an unpaid balance from another credit card to the new one. This might be for a 3 month or a 6 month period. Yes he avoids paying interest for a period of time, however these amounts eventually must be repaid. This approach has caught up with him and now he has 5 credit cards with all of them at their maximum levels. When he was doing these transfers, he was avoiding interest, but not repaying any of the debt that he owes.
He is about to face frequent calls from collection agencies, he may become late paying his rent and utilities which jeopardize his ability to stay where he is and he will have an even more difficult time to find a lender willing to make a bad credit loan to him so he can consolidate his debt. Once collection agencies are involved, finding someone to lend money is very difficult even if consolidating debt is the right thing to do.
His current payments with interest and monthly principle will be high due to the high interest rates of 19% or more. It will take him a really long time to repay what he owes, since the credit card companies really do not want to be repaid. They just want you to keep paying the interest so they can continue to make money.
With a debt consolidation loan at an interest rate somewhere between 5% and 10%, this client could save a great deal and pay his debt off much more quickly. He has to arrange this debt consolidation loan before his bad credit rating becomes even worse.
He also has to clean up his bad habits. First of all focus on repaying his debt to lower the amount of interest he is paying. Secondly avoid new debt until he has this under control. Third, never miss a payment of any kind. Always plan ahead and meet the commitments to avoid negatively impacting your credit rating. Once he has repaid his existing debt, he can focus on improving his credit rating and arrange better loans in the future should he need them.
The offer to work overtime to make some additional money should be strongly considered. It would be an opportunity to create added income that could be used to repay some of the debt that he has.