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Can I Find Out If I’m Eligible to Consolidate Debts Before Applying?

Loan applications can be nerve-wrecking. Consolidation Expert break down how you may be able to find out if you're likely to be accepted for a debt consolidation loan before applying.

Between credit cards, overdrafts, personal loans, and other obligations, juggling multiple debts can quickly become overwhelming. Debt consolidation loans can provide relief by replacing multiple scattered unsecured debts with one loan with an affordable monthly payment.

But before going through the application process, it’s important to check whether you’ll qualify. Loan applications typically involve hard credit inquiries, and too many of these can harm your credit score.

Fortunately, many consolidation loan lenders and comparison sites feature a free ‘soft’ loan approval check. These tools can estimate your eligibility for a consolidation loan and provide an indicator of the rates and terms you may be approved for.

Key Takeaways:

  • Applying for consolidation loans involves a ‘hard’ credit check, which may temporarily lower your credit score. This can make borrowing more difficult.
  • Pre-qualify using a soft credit check before applying to estimate your approval odds and interest rates.
  • Good credit scores typically have the best consolidation loan approval chances and lowest interest rates. However, there are options available for those with poor credit.
  • Lenders also look at factors like your credit history length, current debts, income, and job stability when deciding on applications.
  • Getting informed and checking your eligibility before submitting applications avoids wasted hard credit checks and unexpected rejections.

How Do Soft Credit Checks Allow Pre-Qualification Without Risk?

Soft credit checks, also called “soft credit pulls” or “soft inquiries”, allow lenders to review your potential eligibility for a loan before you apply.

With a soft enquiry, lenders can access your credit report information – such as your accounts and payments history – to gauge your general creditworthiness. But because the enquiry isn’t attached to a specific loan application, it doesn’t impact your credit. It also won’t be visible to potential lenders who may view your credit report in future.

Checking your preliminary eligibility upfront using soft credit checks allows you to estimate your likelihood of being approved for a consolidation loan in advance. However, it isn’t necessarily a guarantee that you will be accepted. Approval may still require further income and identity verification later in the full formal application.

What Are the Benefits of Pre-Qualifying for a Consolidation Loan?

Taking just a few minutes to pre-qualify and check your estimated consolidation loan eligibility upfront offers several advantages:

  • Pre-qualification prepares you in advance for the general likelihood of approval or denial when you ultimately do apply for a consolidation loan.
  • If pre-qualification shows you may not be approved for a consolidation loan, you can take time to proactively improve your credit report before applying.
  • By pre-qualifying, you’ll also receive an estimate of the interest rates and terms likely available to you based on your unique credit history and risk profile.
  • Checking eligibility beforehand allows you to compare estimated rates across multiple potential lenders to find the best offers before formally applying.
  • Checking your eligibility first also prevents wasted hard credit check inquiries on your credit file if the pre-qualification results indicate poor approval odds.

It is quick and easy to check your preliminary consolidation loan eligibility online through various lenders, brokers, and comparison sites. Just make sure the tool you’re using specifically states that it involves a soft credit check.

Will the Loan Amount Affect My Eligibility?

Before you apply for a consolidation loan, you should calculate how much you’ll need to borrow. This is important, as it will make a difference to your eligibility. Larger loans present more risk to the lender, so generally involve stricter borrower criteria, such as larger incomes or higher credit scores.

Unlike other debt solutions, such as debt management plans, consolidation loans can be used to pay off both priority and non-priority debts. For example:

  • Outstanding credit card and store card account balances
  • Payday loans that carry high interest rates and fees
  • Existing fixed term personal loans from banks, credit unions, or online alternative lenders
  • Overdue rent and bills, such as gas, electric, broadband, or council tax
  • Unpaid fines, tax or child maintenance
  • Old debts that have gone to collections, but you still owe
  • Mortgage arrears and car finance – though some lenders may not allow consolidating secured debts

You can use a consolidation loan to cover all your debts, or only some. For example, you could leave out a personal loan that’s close to being paid off if consolidation may invoke early repayment charges. Assess your financial situation thoroughly to get a realistic idea of the loan amount required before applying.

How Can I Check My Eligibility to Pre-Qualify?

You have several quick options to check your preliminary consolidation loan eligibility and estimated interest rates:

01. Online Pre-Qualification

Many lenders detail their eligibility criteria online or offer simple pre-qualification forms on their websites. This provides an immediate indication of potential approval, though it may take time to go through each lender one by one.

02. Speaking to a Loan Advisor

You could also speak to a loan advisor or broker directly. They can provide more details on eligibility criteria and offer personalised insights on your likely approval odds for a specific loan amount.

03. Brokers and Comparison Sites

Comparison sites and consolidation loan brokers, such as Consolidation Expert, can check your eligibility across their full network of lenders using one simple pre-approval process. This allows you to easily compare personalised pre-qualified options side-by-side.

What Factors Do Lenders Consider When Reviewing Consolidation Loan Applications?

Lenders typically look at multiple factors and details within your full credit profile when considering an applicant for a consolidation loan:

01. Credit History and Score

Your credit rating can greatly impact the consolidation loan interest rate and approval odds offered. This is because it reflects your perceived creditworthiness and risk level based on past behaviours.

In general, the higher your credit score, the better your chances of being approved. Having a longer established credit history with older aged accounts also signals lower risk to lenders.

A history of missed payments or CCJs, on the other hand, can be a red flag – but it doesn’t necessarily mean your application will be denied. Many lenders specialise in offering consolidation loans to those with poor credit scores. However, the interest rates you’re offered are likely to be higher.

02. Debt-to-Income Ratio

Carrying numerous existing debt balances across a wide variety of accounts typically makes additional borrowing more difficult. However, for consolidation loans, this may not be the case, as the funds will be used to clear your existing debts completely.

However, your debt-to-income ratio will be taken into account. This refers to the amount of debt you hold compared to what you earn. Some lenders may decline consolidation loan applications if your monthly payments will exceed approximately 50% of your gross monthly income.

03. Job and Income Stability

Having verifiable income from long term employed positions will generally improve your probability of consolidation loan approval. This is because it poses less risk to the lender. If you frequently change jobs, work unpredictable hours, have a variable self-employed income, or rely on seasonal work, your chances of approval may not be as high.

04. Collateral and Assets

For applicants seeking larger consolidation loan amounts but with poorer credit, collateral may be required. This means securing the loan against an asset, such as your home.

In cases where the borrower has a lower income or shaky credit history, offering up collateral could increase your chances of approval or securing a lower interest rate. However, you risk losing the asset if you stop making payments or default on the loan.

Tips for Improving Your Consolidation Loan Eligibility

If the results of a pre-qualification check indicate you would not be approved for a competitive rate consolidation loan, there are some steps you can take to improve your eligibility:

  • Check your credit report for inaccuracies that may be lowering your score and report any errors to the credit bureau.
  • Create a strict budget and cut down on unnecessary expenses to improve your cash flow and reduce your risk of missing payments. Consistently making debt repayments on time can improve your credit score.
  • Pay down existing credit card balances to improve your credit utilisation ratio. Asking for a credit limit increase can also help, but don’t be tempted to increase your spending.
  • Avoid unnecessarily applying for additional new credit accounts or loans in the short term, as hard credit inquiries may damage your credit score further.
  • Let your credit history length grow by keeping your oldest established accounts open and in good standing.
  • Become an authorised user on a partner or family member’s well-managed older credit account to add positive history without utilising it.
  • Try to increase your income, e.g., by negotiating a raise with your employer or applying for a higher-paid position. This will help lower your debt-to-income ratio.
  • Look into secured consolidation loans or guarantor loans, which require a co-signer. Just be aware of the potential consequences if you default.

With some focus and diligence, you may be able to improve your creditworthiness and increase your odds of consolidation loan approval on your next attempt.

Consolidation loans are not for everyone. Before you apply, it’s important to consider the benefits and drawbacks, and check that consolidation is a good option in your financial situation.

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Compare Your Consolidation Loan Options

If you’re interested in comparing your consolidation loan options, don’t delay. At Consolidation Expert, we specialise in matching individuals with personalised consolidation loans tailored to their unique needs.

Our lenders consider a range of credit scores and offer loans from £5,000 to £75,000. Our initial online application uses a soft credit check – so you can find out if you initially qualify with no damage to your credit score.

Apply online today with Consolidation Expert. We’re ready to help you on your journey to a brighter financial future.

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Representative 14.8% APR

We are a broker, not a lender.

Representative Example: Borrowing £15,000 over 60 months, repaying £355.28 per month, total repayable £21,316.57.

Total cost of credit £6,316.57.

Interest rate 14.8% (variable).

The lenders on our panel offer loans for 12-360 months, with rates from 4.7% APR to 42.6% APR.

The Representative Example is based on all loans paid out by lenders between 1st Jan 2022 and 31st Dec 2022.

Further reading

Read Is it Possible to Consolidate Short-Term Same Day Loans?
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Read Can I Consolidate Holiday Loans with Other Debts?
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Read How Can I Pay Off My Debts Faster?
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