Ncsecu Debt Consolidation Loan (2024)

FAQs

How hard is it to get approved for a debt consolidation loan? ›

Although lenders differ, most require that borrowers have a good credit score, a low debt-to-income ratio and a steady income. Some lenders cater to borrowers with lower credit or allow for co-signers, which can increase your approval odds and or grant you a better interest rate.

The top reason banks and other lenders deny a consolidation loan application is the applicant's poor credit score. Your credit score is a number that represents how risky you are to the lender.

Every lender sets its own guidelines when it comes to minimum credit score requirements for debt consolidation loans. However, it's likely lenders will require a minimum score between 580 and 680.

Lenders might not advertise it, but most of them have a minimum credit score required to get a loan. If your score is less than 670, you might be out of luck for a debt consolidation loan. Even if you're over 670, a problematic debt-to-income ratio (more on that below) or payment history could derail your loan.

It makes getting out of debt easier — and sometimes cheaper. That said, debt consolidation isn't a magic bullet. It can temporarily ding your credit scores or bring even more damage if you're not disciplined with your debt repayment.

You can afford to repay the loan: A debt consolidation loan will only benefit you if you can afford to repay it. You'll risk getting into a deeper debt cycle if you're not 100 percent sure you'll be able to afford the monthly payment down the road.

In a nutshell

Insufficient income, a high debt-to-income ratio, and a poor credit score are just some of the many reasons why a debt consolidation loan application may be rejected. Each lender has different eligibility criteria and takes different factors into account.

On the other end of the spectrum, if your total debt is more than half of your income, consolidation may not be the best option.

Debt consolidation loans typically involve applying for a new loan to pay off existing debts, and the approval and disbursement process can take several weeks. On the other hand, balance transfer credit cards may offer quicker results, as the transfer of balances can occur within a few weeks.

The short answer is Yes, people are generally allowed to use their credit cards after debt consolidation as it does not typically involve closing credit card accounts.

Do credit unions do debt consolidation loans? ›

Credit unions are a good source for debt consolidation loans, or personal loans, as they are often called. Credit unions are more flexible about approving debt consolidation loans than traditional lenders, like banks.

People often use unsecured personal loans, which means no collateral is needed, to consolidate credit card debt. They can also use debt consolidation to combine and pay off other types of debt, such as auto loans and other personal loans.

Reason 1: You have too much debt for your income level

To consolidate your debts, you need to have a high enough monthly income to be able to easily make the monthly payment for your consolidation loan, which is calculated based on the interest rate and how long you plan to take to pay off the loan.

Check Your Credit Score

The credit score you need for a personal loan varies by lender. In general, your chances of getting a debt consolidation loan are better if you have a good credit score, usually defined as 670 or above by FICO.

While most banks and credit unions offer debt consolidation loans, the approval criteria can be stringent. Most require applicants to have at least a good credit score (usually 670 or higher), stable income and a relatively low debt-to-income (DTI) ratio to qualify.

Using a personal loan to pay off debt helps you get rid of multiple payments and go down to one payment per month — and hopefully with a much lower APR. Consider using a debt repayment calculator to determine how much sooner you could pay off your debt with a lower interest rate.

Four types of debt are commonly consolidated: credit card debt, student loan debt, medical debt and high-interest personal loan debt. You may reduce the overall cost of repayment by securing better terms and interest. You'll also have a single payment to keep track of instead of several.

While you may qualify for a debt consolidation loan with bad credit, you'll likely pay more in interest rates. By taking a few months to improve your credit, you could boost your odds of approval for debt consolidation loans and other types of credit and with lower interest rates.