What Factors Determine Approval for a Consolidation Loan?

When applying for a debt consolidation loan, the loan insurer will take into account two main factors to determine if you will be approved. The first factor is your Debt-to-Income (DTI) ratio. This ratio is calculated by dividing your total monthly debt payments by your gross monthly income. If your DTI is less than 41% with new loan payments included and credit card payments discounted, you will be approved. The second factor that will be taken into consideration is your credit score. Your credit score is a numerical representation of your creditworthiness and is based on the information in your credit report. Generally, the higher your credit score, the more likely you are to be approved for a consolidation loan. Debt consolidation loans can be a great way to reduce your monthly payments and get out of debt faster. However, it is important to understand the two factors that will determine if you are approved for a loan. Knowing your DTI and credit score can help you make an informed decision about whether or not to apply for a consolidation loan.