High Debt-to-Income Ratio Consolidation Loans

Writer and editor - Joseph Smith | Updated on 2020-03-04
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When it feels like there is no end in sight, a high debt-to-income ratio consolidation loan can be the answer you’ve been hoping for.

If you have multiple standing debts with various companies or lenders, consolidating those debts may be the next step. A high debt-to-income ratio, or DTI, is only one of many factors that lenders consider when deciding to approve a loan.

Consolidating your debt is not a simple process. It can be done in several different ways and in multiple stages. You need a realistic payment that you can make each month. It would be best if you also had a realistic timeline. How many years can you keep up these steady monthly payments?

Loans Amount Cost / APR ? Bad Credit Features
QuickLoanLink (Personal loan) $300 - $35,000 APR:
Starting at 6.90% ?
Bad credit allowed
Allowed
  • Loan term 2 months to 7 years
  • Credit check type: Soft ?
  • Next-day deposit: In some cases ?
  • Min creditscore: 550
  • High approval rates ?
  • Time for decision: 1.5 min ?
  • Type of service ?
CashUSA
$500 - $10,000
Individual rates
Bad credit allowed
Allowed
  • Loan terms start at 3 months.
  • Next-day deposit: In some cases ?
  • High approval rates ?
  • Time for decision: 1.5 min ?
  • Type of service ?
LifeLoans (Personal loan) $500 - $40,000 APR:
Starting at 5.99% ?
Bad credit allowed
Allowed
  • Loan term 2 months to 5 years
  • Credit check type: Both ?
  • Next-day deposit: In some cases ?
  • Min creditscore: 580
  • High approval rates ?
  • Time for decision: 1.5 min ?
  • Type of service ?
CreditLoan (Personal loan) $100 - $40,000 APR:
Starting at 5.34% ?
Bad credit allowed
Allowed
  • Loan term 2 months to 7 years
  • Same-day deposit: In some cases ?
  • High approval rates ?
  • Time for decision: 1.5 min ?
  • Type of service ?
HonestLoans
$400 - $5,000
$30 - $750 ?
Bad credit allowed
Allowed
  • Same-day deposit: In some cases ?
  • High approval rates ?
  • Time for decision: 1.5 min ?
  • Type of service ?
OppLoans (Direct Lender)
(Personal loan)
$1,000 - $5,000 APR:
Starting at 99.00% ?
Bad credit allowed
Allowed
  • Loan term 9 months to 3 years
  • Next-day deposit: In some cases ?
  • Low approval rates ?
  • Time for decision: 1.5 min ?
RubikLoan
$100 - $1,000
$1,000 - $5,000
$15 - $300 ?
APR from 6.9% ?
Bad credit allowed
Allowed
  • Same-day deposit: In some cases ?
  • High approval rates ?
  • Time for decision: 1.5 min ?
  • Type of service ?
Personal Loans (Personal loan) $500 - $35,000 APR:
Starting at 5.99% ?
Bad credit allowed
Allowed
  • Loan term 3 months to 6 years
  • Credit check type: Soft ?
  • Next-day deposit: In some cases ?
  • Min creditscore: 580
  • High approval rates ?
  • Time for decision: 1.5 min ?
  • Type of service ?
BadCredit.com
$100 - $5,000
Individual rates
Bad credit allowed
Allowed
  • Next-day deposit: In some cases ?
  • High approval rates ?
  • Time for decision: 1.5 min ?
  • Type of service ?
OpenCashAdvance
$200 - $5,000
Individual rates
Bad credit allowed
Allowed
  • Same-day deposit: In some cases ?
  • High approval rates ?
  • Time for decision: 1.5 min ?
  • Type of service ?

What is a high debt-to-income ratio when it comes to consolidation loans?

First, let’s be clear what we’re talking about. A high debt-to-income ratio (we’ll call this DTI from here on out) has to do with the comparison of your income to the debt you owe. Let’s calculate a hypothetical one:

  • Income = $3,000 per month
  • Debt = $2,000 (all monthly payments for 1 month)
  • Debt divided by Income 2,000 / 3,000 = 0.67 or 67%

The higher the percentage, the less able you appear to meet any new payments. The industry standard is 43%. That means if you’re DTI is 43% or higher, getting a loan becomes much more difficult.

Where to get high DTI consolidation loans

Understand that a debt consolidation loan differs from other types of loans. Consolidation loans should work to pay off debt. Here are a few other points to know about debt consolidation loans:

  • Can have higher or lower interest rates than a personal loan depending on things like the lender, FICO score, income, DTI, and other qualifications
  • Usually have lower requirements than a personal loan does
  • Offer a range of time to be repaid (typically three to five years)
  • Paid monthly at a fixed amount and with a fixed interest rate

All lenders have their particular requirements. If one turns you down, don’t give up. That doesn’t mean all others will.

Common lenders are:

  • Banks
  • Credit unions
  • Financial institutions
  • Connectors find direct lenders right for your situation. Some connectors have extensive networks and can submit your application to 100 different lenders. Connecting with a system can save you the time and the heartache of applying individually to multiple lenders.

How to lower your high debt-to-income ratio

You can lower your DTI a few ways:

  • Temporarily increase DTI to drop it in the long run. In other words, making payments for a short period so you don’t have to later on. Your DTI has reduced, and your chances of receiving a loan increase.
  • Target your high-interest loans first. The higher the interest rate, the more it raises your DTI.
  • Take on part-time work or temporarily increase your income. Use your part-time money to pay down high-interest debt.
  • Utilize credit card promotions. Sometimes you can transfer a balance for six months with no interest.

Consider all your options even if you have a high DTI

If your DTI is high, don’t rule out the possibility of receiving a loan. Debt consolidation promises a solid first step.

Next, understand the different types of debt consolidation loans.

Personal loan

A personal loan means a lump-sum offered in exchange for a fixed payment with interest over an agreed period.

  • No collateral like with home quite loans
  • No need for a new credit card (for a line of credit)
  • Usually, higher interest rates
  • Requires a good FICO score

Home equity loan

The market value of the property rises as you pay off more of your mortgage. The difference in amount is called your home equity. Home equity loans, similar to a home equity lines of credit, use your home equity to secure loans from financial institutions. These types of loans come with a fixed monthly payment and a fixed interest rate.

  • The amount is dictated by the property’s equity
  • Essentially, your home becomes collateral
  • Funds may be available as a line of credit, not a fixed loan
  • Funds used for whatever you choose, not just paying off debts
  • Interest rates are usually lower than with other loans

Cardholder options

The goal here is to manage your interest rates by opening up multiple credit cards. Use one line of credit with lower interest rates to pay off the others. This practice is sometimes referred to as transferring balances.

  • A typical step in debt consolidation
  • Makes your debt more manageable and payments straightforward

Debt consolidation loans and services

National Debt Relief helps you consolidate your debt, provides debt management counseling, and talks to your creditors to help settle your debts. They don’t give out loans but can help you achieve a much more manageable debt by:

  • Lowering the overall debt owed
  • Lowering your monthly payments
  • Lowering your interest rates to help you get caught up faster

Finally, know your FICO score. You can do so through Experian, Equifax, and TransUnion. See more options for no credit check debt consolidation loan here.

Risks with high debt-to-income ratio consolidation loans

There are a few risks to consider. First and most notable, it can be challenging to get the loan with a high DTI and or a low FICO score. Some other key considerations:

  • Missed payments – If you miss payments on the loan, your credit score will take more hits, and your chances of receiving another loan, later on, are drastically reduced. Make sure your payment and interest rates are realistic.
  • Longer-term debt – On the other hand, lower monthly payments mean longer-term payments. You can get stuck paying for a long time. At first glance, it may not seem like much of a consideration when you’re applying for the loan. Later on, you may feel forever stuck in debt.
Joseph Smith

Joseph Smith
Writer and editor

Joseph Smith is an experienced freelance writer with over 11 years of experience. His area of expertise includes finance, loans and lending. His work has been featured on various large websites including this one.
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