Getting A Personal Loan For A Debt Consolidation or Big Bill

Getting A Personal Loan For A Debt Consolidation or Big Bill


If you need money for home improvement, starting a business, debt consolidation, or for whatever reason, personal loans can be an excellent financing option.

In case you didn’t know, a personal loan is usually unsecured. By that, we mean, collateral is not needed, unlike other types of financing, such as a home equity loan. Also, the average interest rate for a personal loan is relatively lower compared to credit cards, which is another type of unsecured debt.

With all these in mind, the question now is how to find and apply for a personal loan? How to ensure that you are choosing the best deal? For a little help, here’s a quick yet thorough guide to getting a personal loan.

Look Into Your Credit

Just like other financing options and, your credit score will surely play a crucial role in deciding if you qualify or not for unsecured personal loans. Also, the rates that you are given. There are five credit score ranges to know, according to myFICO. These are the following:

  • Poor: Under 580
  • Fair: 580-669
  • Good: 670-639
  • Very Good: 740-799
  • Exceptional: Over 800

If your credit card or bank issuer does not give you your credit score, you can look at it for free through credit score tools such as Credit Sesame and Credit Karma. Additionally, you can freely check your credit report from the different credit bureau at least once every year at

Moreover, if your score falls under the poor or fair category, perhaps you might need to improve your credit score first before you apply for a personal loan. You can do this by cutting down your credit usage rate, timely payment of your bills, and establishing a long credit history.


Compute Your Debt-to-Income Ratio (DTI)

Take note that your credit score is not the only thing that creditors will consider. Usually, lenders will take your DTI into account, too. Why is your DTI needed? It’s because it might be hard to deal with another debt payment in your budget if most of it is already going towards loan repayment.

To get your DTI, add up all your loan payments and then divide them by your monthly income. For instance, you pay $700 for the mortgage, a $300 for your car, and a $200 student payment every month. Then, you have a total of $1,200 in monthly debt obligation.

Also, say, for example, your monthly income is $4000. That said, your DTI would be .30 or 30%. Is this percentage considered a good DTI? Well, yes! In fact, most lenders and banks prefer borrowers who have at least 35% DTI. Although you can still be eligible for a personal loan with a DTI greater than 35%, you are unlikely to get the best rates.

Have Knowledge Of The Different Types of Personal Loans

Once you know your DTI and credit score situation, you can then consider which personal loan is right for you. For the most part, personal loans are unsecured, ideal for loan amounts of at least $1,000, and for two-year repayment terms.

But relying upon your financial and circumstances needs, you might want to opt for a less common personal loan option. Say, for instance, if you get denied for an unsecured loan application, you can still apply for a secured one.

And to qualify, you will need assets that can be used as collateral, savings account, or certificate of deposit. Alternatively, you can look for a short-term personal loan of at most $1,000.

These kinds of circumstances cause people to make use of payday loans. However, remember that payday loans charge high-interest rates.

Get Quotes

When you know which personal loan fits your needs, now is the perfect time to see your pre-qualified offers. The good news is that today, a lot of lenders can utilize a soft credit check to offer you a pre-qualified offer without impacting your credit score.

You can take advantage of online comparison tools to save time in this step. With this service, you can get many different pre-qualified rates without filling out applications to each lender.


Comparing loan rates and terms is not as easy as choosing the loan the most affordable interest rate. You need to consider things like origination fees, loan terms, and whether you want a variable or fixed rates.


Once you know which creditor is right for you, you can then fill out a loan application. Although pre-qualification will, for the most part, need a soft credit check, here, you can expect lenders to do a hard credit check when you hand over your full application.

You can get a decision right away, depending on your situation. Or, it can take a lot of time, particularly if lenders need more documents and information.


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