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Five Easy Steps to Qualify for a Credit Card Debt Consolidation Loan


Epic Loans Editorial Team

How to qualify for a credit card debt consolidation loan

Managed efficiently, multiple credit cards can afford a variety of benefits, including increased spending power, rewards and offers, a low credit utilization ratio, and a high credit score. However, owning multiple cards carries an inherent risk of outstanding debt.


According to recent reports, over 25 million Americans are not caught up on credit card payments, contributing to the national debt statistics of $1 trillion in credit card dues. If, unfortunately, you are among these, there are ways to make amends and get back on top!


If you are going through a financial crisis, it can be overwhelming to keep track of numerous credit card payments and deal with burgeoning interest rates. You need a strategy that can help you consolidate your multiple high-interest accounts into a single, convenient debt, preferably at a lower interest rate. This is where a debt consolidation loan can help.


Debt consolidation is an effective strategy for simplifying debt repayment, gaining better control over your finances, and maintaining a good credit score despite economic hardships. In this article, we will walk you through the key steps in getting qualified for a credit card debt consolidation loan.

How to Get Approved for a Credit Card Debt Consolidation Loan

If you have decided to roll your credit card debts into a single debt consolidation loan, here are five steps to ensure that you get approved for one:

Assess your Credit Card Debt

Add up your outstanding credit card balances to get a clear idea of the loan amount you will need. Next, add the monthly credit usage on all your cards and check if you are using disproportionate credit.

There are two ways to self-assess if you have excessive credit card debt:

  • Credit Utilization Ratio

A credit utilization ratio of over 30% implies that you are using too much credit. To find out your credit utilization ratio, divide the revolving credit you are using by the total credit available across all your credit cards. If you are using $1,500 out of a total of $3,000 available to you, your credit utilization ratio is 50%.

  • Debt-to-Income Ratio (DTI)

DTI, also expressed as a percentage, is the ratio of your monthly repayments and your gross income. A DTI of over 43% makes you appear as a risky borrower.

High credit utilization and DTI ratios may hamper your chances of getting a loan, so it is best to try and lower them before you approach a lender.

Compare your Options

You can get debt consolidation loans from multiple institutions, including banks, online lenders, and credit companies. Compare term interest rates, annual percentage rate offers, fees, and repayment terms before you choose a lender that best suits your needs. Additionally, you may want to check customer reviews to establish the lender’s reputation.

Check your Credit Score

FICO defines a good credit score as 670 or above. A higher credit score qualifies you as a safe borrower and improves your chances of obtaining low interest rates. It is among the key qualifications for securing a credit card debt consolidation loan on favorable terms. 

Although you can get a consolidation loan with a low or bad credit score, the interest rates will be significantly higher – perhaps higher than your current credit card interest rates.

You can download your free annual credit report by visiting the AnnualCreditReport.com website. Check your report for inaccuracies and find ways to improve a low score before you approach a lender.

Apply for a Loan

Lenders require documents such as pay stubs, bank statements, tax returns, and personal identification. Have all the documents ready before you submit your application. 

Some online lenders let you upload the documents to an online portal. Still, most traditional lenders, like banks and credit unions, require you to visit a physical branch for loan application and processing.

Application Approval and Funding

Loan approvals often take time, as the lender needs to evaluate your credit history and financial information. Once you get the approval, review the documents to understand the repayment terms, conditions, and potential costs. You can then proceed to close the deal. 

Your lender will either deposit the loan proceeds to your bank account or disburse them directly among your creditors. If you receive the amount in your account, pay off your old creditors immediately to avoid accumulating additional interest. 

After you repay your former creditors, check your old credit card accounts for a zero balance. This step is crucial even if your lender offers direct payments to your creditors.

Read More: How to Negotiate Credit Card Debt

Managing a Credit Card Debt Consolidation Loan

Now that we have seen how to qualify for a credit card consolidation loan, let us explore some best practices for managing a consolidation loan:

  • Explore various debt products and review interest rates

Lenders offer different types of debt consolidation loans, such as personal loans, balance transfer credit cards, and Home Equity Lines Of Credit (HELOC).

While personal loans are the easiest to manage, it is worth exploring other lines of credit for better interest rates and promotional rates.

If you opt for a balance transfer card at 0%, know that normal rates will apply when the introductory offer ends, and plan for the change.

  • Automate payments

Automate the monthly payments on your new loan. This will help you avoid late fees and improve your credit score in the long run.

  • Create a monthly budget and avoid new debt

Outstanding credit card debt is often the result of overspending and bad financial habits. To avoid accumulating more debt, create a realistic monthly budget that factors in emergency expenses. Refrain from overstepping your budget limits. Additionally, avoid using the old credit cards after reaching a zero balance.

  • Review your credit report

Review your credit report regularly to spot inaccuracies and understand where you stand with lenders.

Benefits of a credit card debt consolidation loan

Benefits of a credit card debt consolidation loan

When you consolidate your debts, you simplify your finances and make them more manageable. Below are the key benefits of taking a credit card debt consolidation loan:

  • Single monthly payment

Instead of keeping track of several payments, you now have to make a single monthly payment, typically at a fixed interest rate. This helps you streamline your finances and have a structured plan for getting out of debt.

  • Lower interest rates

If you have a good credit score, you can avail of a personal loan at a much lower interest rate than what you are paying on your credit cards. Currently, the average rate of interest on personal loans is 11.43%, compared to 20.93% on credit cards.

  • Fixed repayment period

A personal loan comes with a preset tenor, so you know exactly when you can pay off your debts. If your lender does not charge a prepayment penalty, you can even expedite the payoff.

  • Improved credit rating

Making timely payments on your debt consolidation loan makes for a positive payment history, which will eventually contribute to a high credit score.

Conclusion

A debt consolidation loan is a good option for individuals trying to eliminate the cycle of outstanding credit card debts and get a hold over their finances. Qualifying for a credit card debt consolidation loan is easy if you follow a few essential steps and find the right lender for your needs.  

Epic Loans can help you manage your credit card debts by offering a customized debt consolidation strategy to fit your requirements. Our network of lenders and service providers specializes in helping people with bad credit or too much debt so you can qualify for a credit card debt consolidation loan even in adverse financial circumstances.  

Schedule a free consultation with an Epic Loans representative to know more.

Frequently Asked Questions

How do you qualify for a credit card debt consolidation loan?

You can qualify for a credit card debt consolidation loan by finding a lender who can offer a comprehensive debt consolidation plan to fit your needs. Your chances of getting approved are better if you have a credit score above 670.

Is getting a credit card debt consolidation loan a good idea?

Getting a credit card debt consolidation loan is a good idea if you are overwhelmed by the outstanding balances on your multiple credit card accounts and are struggling with high, and perhaps varying, interest rates.

What is a good credit score for a credit card debt consolidation loan?

FICO defines a good credit score as 670 or above. Ideally, you should have a score of at least 700 to qualify for a credit card debt consolidation loan at lower interest rates.

Does taking a debt consolidation loan impact your credit score?

Applying for a loan may drop your credit score by up to 5 points, as it calls for a hard credit pull. However, you can make up for it by making your loan payments on time and building a good payment history.