8 Best Debt Consolidation Loans for Credit Score 600

A Debt Consolidation Loan is a good option for someone looking to consolidate their debt into one monthly payment. This can be challenging for those with a poor credit history and score and the process can be discouraging. Those who are considering a Debt Consolidation Loan with poor credit should consider the following.

How Much Can I Borrow

This question has no easy answer, as terms and rates can vary widely from applicant to applicant. This has to do with the amount of risk different borrowers present to the lender. This being said, some general rules of thumb can be applied to give one a rough idea.

Generally speaking, an individual’s total debt (excluding mortgages) can be 200% of their total yearly income before taxes. If one’s gross income is $40,000 per annum then a lender will generally feel comfortable with you owing up to $80,000. This is of course affected by credit score and history.

View Best Debt Consolidation Loans for Credit Score 600

One individual lender will rarely lend you 200% of your annual income. Lenders, especially those granting unsecured loans, make their money off of interest. The less confidence in the borrower’s ability to pay their monthly requirements in full and on time the less money the lender will be willing to risk. Because of this, it may require the borrower to borrow from different lenders.

What Rate Can I Expect

Rates are much more difficult to predict with simple rules of thumb or generalities. Interest rates are closely tied to the current economic and market conditions and change regularly. Those with higher credit scores will be given lower interest rates than those with lower scores. The best way to see at what rate a lender is willing to lend money is by applying.

Lenders do soft credit checks which do not affect one’s credit score. A hard credit check is only done once the borrower agrees to the terms of a loan. Most lenders will be fairly competitive, but some may offer better rates than others.

The average interest rate for a personal loan currently is 10.6% (24 month loans) as of 2019. Those with credit scores under 680 will likely pay a higher interest rate.

How Can I Improve My Credit

Some people’s credit score is simply too low to allow them to secure a Consolidation Loan. In this case, the only option is to improve the credit score until it is sufficient to meet the lenders’ requirements. Here you can view alternatives for debt consolidation loans for poor credit.

The best way to improve one’s credit score is by being consistent with their monthly payments. This is true, but it is also important to not add more debt. Lenders do not only look at payment history, but they also look heavily on one’s Credit Utilization Ratio. Simply put, how much of one’s available credit do they use. Let’s say you have a credit card with a limit of $1000 and a balance of $900, it would mean Credit Utilization Ratio of 90%. Simply making the monthly payments will not increase the credit score unless the Credit Utilization Ratio decreases as well.

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