What Credit Score is Needed to Qualify for a Debt Consolidation Loan?

If you have a number of different loans from different institutions, managing them can become rather bothersome. One of the best ways around this is to go for a debt consolidation loan. This would reduce your monthly payments to one and ideally, lower your average interest rate as well. With that in mind, you’re likely to be wondering what credit score is needed to qualify for a debt consolidation loan.

Qualifying For Debt Consolidation Loans

The good news is there no fixed credit score to qualify for a debt consolidation loan. Each lender has its own credit score preferences and loan requirements. Now, with that said, what cuts across all creditors is the lower your credit score, the higher your interest rate will be. This is critical, as lowering your interest rate is one of the primary reasons to consolidate debts.

This doesn’t mean if you have a bad credit score, you won’t get a debt consolidation loan. Some lenders accept very low credit scores, but they compensate this by charging high-interest rates. 

Other factors lenders consider are your debt-to-income ratio and your income. These will help them determine whether you’ll be able to service your loan. However, your credit score should not go below 650 if you want to get a good deal.

Can You Get a Debt Consolidation Loan With a Bad Credit?

So yes, in order for you to qualify for a debt consolidation loan on advantageous terms, you’ll need to have a strong credit score. If you have a bad one and you’re struggling to cover your financial obligations, it still won’t hurt to look into a debt consolidation loan.

Even if the interest rate is high, it might still be a better option than trying to repay the loans separately. Running your numbers through a debt consolidation calculator will help you know for sure. Meanwhile, if you have a credit score of around 600, sufficient income, and your history of repayments is impressive, you can feel pretty confident approaching a lender for a debt consolidation loan.

The following steps can help increase your chances of having your debt consolidation loan application approved.

Monitor and Check Your Credit Score

Your credit score is the most important factor in determining whether or not you qualify for a loan. Generally, a lower credit score attracts high-interest rates. To stand a better chance of getting a debt consolidation loan, you need to maintain your credit score around 600, though some lenders can allow credit scores of as low as 580.

Lenders have tools you can use to monitor and check your credit standing. So before you approach a lender, use the tools they provide on their websites to gauge your chances of qualifying for a debt consolidation loan. You can also get free copies of your credit reports at AnnualCreditReport.com.

Shop Around

Seek multiple offers. Thinking you are desperate, some lenders mightbe inclined to try to take advantage of your situation, and offer you loans at very high rates. Don’t be in a hurry. Take your time to compare fees, repayment terms, loan amounts, and interest rates from many lenders. In addition to banks inquire with online lenders and credit unions. This may take time, but the effort is worth it. At the end of it all, you may save thousands of dollars in interests and fees.

Wondering about what credit score is needed to qualify for a debt consolidation loan may discourage you from seeking help. However, there are options available for you, even with a less than stellar credit rating.