You want to put your credit card debt behind you, but you can’t seem to get over the hump. You’ve heard of debt consolidation, but doubt you have the credit score to pull that strategy off.
Well, you may still have options.
Let’s take a look.
What Is A Debt Consolidation Loan?
It’s a loan that combines debts – mostly credit cards – under a single account with one monthly payment. Consolidation generally gives borrowers a lower interest rate than the aggregate amount being paid on existing debt. And because there’s just one payment each month, a consolidation loan makes it easier to manage finances. Another benefit is debt is spread out over time, rendering each monthly payment more affordable.
Can I Get One?
If you have a bunch of debt, consolidation can be a sound move. But you may wonder, what is the minimum credit score for a debt consolidation loan? It varies by lender, but some do specialize in loans for damaged credit and weigh factors other than your credit score when assessing your eligibility.
You can help your chances by first taking a few months to reduce your spending and using those savings to pay down debt. Then you can shop around for lenders that will likely take your recent efforts into consideration.
How To Qualify
It’s true that each lender sets its own requirements for borrowers hoping to consolidate debt. However, all lenders will consider your credit score, income, and debt-to-income ratio to assess how capable you are of paying them back.
You usually will need a credit score of about 650, although there are some lenders who cater to those with bad credit. Those lenders may accept scores as low as 580. Just be mindful the lower your credit score, the higher your interest rate.
Steps To Boost Your Chances
Check and monitor your credit score. Once you know your credit score it’ll be easier to pinpoint lenders that might be open to working with you. Check out their websites for eligibility requirements.
Shop around. Resist accepting the first offer tendered. Rather, take time to do your homework, comparing loan amounts, repayment terms, and fees from sources that can include banks, credit unions, and online lenders. Shopping around can save you a bundle.
You may want to start with online lenders, which let you view their rates with just a soft credit pull, which doesn’t hurt your credit. You can generally get a personal loan easier from a credit union, but if you have a relationship with a bank, you may want to check there as well.
Consider a secured loan. Debt consolidation loans are usually unsecured, meaning they don’t require collateral such as your house or vehicle. But if you’re still having a tough time finding approval for an affordable unsecured loan, a secured loan could be worth considering.
Note that the collateral typically must be worth enough to cover the loan amount. And because your asset is attached, it’s relatively easier to get approved for a secured loan, and you might even qualify for a better interest rate.
Hold tight and work on your credit. If you’ve thrown the kitchen sink at your situation and you still can’t find a loan that will help you save money, it may be time to wait and improve your credit score. Challenge yourself to pay your monthly debts on time for several consecutive months. It’s also a good time to concentrate on paying down credit card balances and cutting back on spending.
So, what is the minimum credit score for debt consolidation? Well, it varies. What’s important to know is that while the financial strategy works best if you have good credit, you still may have solid options. Do your homework and see.
