Are you afraid that your high debt to income ratio will stand in the way of getting a new loan?
First things first, your debt to income ratio is a summation of your monthly debt repayments divided by your gross income. A high ratio simply means you’re committing a lot of your income to debt repayment, such that whatever remains won’t enable you to service another loan.
Worry not, though.
In this guide, we’re telling how to get a loan with high debt to income ratio.
Find a Lender That’s Likely to Accept Your Application
If you’ve been trying to get a loan with no success, it’s likely because you’ve been approaching lenders with strict requirements. Traditional banks, for instance, won’t give your application second thought if your debt to income ratio is higher than what they require.
However, not all lenders are like traditional banks. There’s an increasing number of companies offering loans to people with poor or no credit, high debt to income ratios, and anyone else who’s blacklisted and thus blocked from accessing the formal lending market. Find out more about what it means to be blacklisted.
Just go online and search for these lenders. You’ll find an overwhelming number of options, but don’t be quick to make a selection. Make a list of lenders, read their online reviews, and reach out to ask about their requirements.
Restructure Your Debts
Debt restructuring involves adjusting the terms and conditions of a loan. In this case, your aim should be to reduce your monthly payments.
Extending the term of a loan is one way to restructure it and reduce the monthly payment. Another way is to reduce the interest rate.
There’s no guarantee that your current lenders will agree to debt restricting, but it doesn’t hurt to try. If that fails, try refinancing. If you’re successful, your debt to income ratio could drop, enabling you to get approved for a new loan.
Pay Off Some of Your Debts or Increase Your Income
Most lenders offering loans to people with poor credit and high debt to income ratios typically charge higher interest rates. They’re assuming greater risk, so it’s understandable that they would slap borrowers with exorbitant rates.
Ideally, you want to get a loan from a traditional bank. It’s possible, but your first have to take steps to lower your debt to income ratio.
Two things you can do: either pay off one of your loans or increase your income.
Neither option is easy, especially at a time when a global health pandemic has caused so much economic devastation, but you can do it if you’re determined. If you’ve got savings, for instance, you can use the funds to pay off an outstanding loan. You can also take up a second or even third job to boost your income.
That’s How to Get a Loan with High Debt to Income Ratio
In a perfect world, none of us would need loans. But this isn’t a perfect world. Many of us need loans to get by. Sometimes you might need to take out a little too many loans for your liking, pushing up your debt to income ratio and making it harder to get new loans when needed.
But with this guide on how to get a loan with high debt to income ratio, you now know the steps you can take to improve your chances.
All the best and keep tabs on our blog for more money advice.
