9 Loans for High Debt-to-Income Ratio Borrowers

9 Loans for High Debt-to-Income Ratio Borrowers
GUIDE
Eric Bank
By: Eric Bank
Posted: January 7, 2020

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Having a steady income is great, but only if it exceeds your spending. That’s a truth well-known to lenders, who routinely calculate a borrower’s debt-to-income ratio (DTI) when considering loan applications. All the lenders reviewed here offer loans for high debt-to-income ratio borrowers.

DTI is defined as total monthly debt (house payments, child support, credit cards, student loans, auto loans, etc.) divided by gross monthly income (that is, income before withholdings, taxes, and expenses deducted from your paycheck).

For example, your DTI is 66.67% if your monthly debt is $2,000 and your monthly gross income is $3,000. While DTI is an important consideration to lenders, it is not explicitly included in your credit reports and must be calculated separately.

Personal Loans | Debt Consolidation | FAQs

Personal Loans for High Debt-to-Income Ratio Borrowers

The following six loan matching services work with networks that will lend to consumers with bad credit and/or high DTI ratios. All six can link you to one or more lenders that promise quick decisions and rapid funding, often on the next business day.

None of these services collect fees from borrowers. Rather, network lenders pay finder’s fees to the matching services.

Eligible borrowers usually must be a U.S. citizen or resident, age 18 or older, have a checking account, valid email address, and work and/or home phone numbers.

  • Short-term loans up to $2,500
  • Online marketplace of lenders
  • Funds available in as few as 24 hours
  • Simple online form takes less than 5 minutes
  • Trusted by more than 2,000,000 customers
  • Not available in NY or CT
  • Click here for official site, terms, and details.
★★★★★

4.8

Overall Rating

Loan Amount Interest Rate Loan Term Loan Example
Up to $2,500 Varies Varies

See representative example

The MoneyMutual network provides personal loans ranging from $250 to $2,500. To be eligible, you must have a checking account and earn at least $800 per month.

The lenders use your checking account to deposit the loan proceeds and collect your payments. MoneyMutual can find you a lender even when you have negative factors such as a high DTI ratio, a low credit score, or a history of collections or bankruptcies.

   
★★★★★

4.7

Overall Rating

Loan Amount Interest Rate Loan Term Loan Example
$500 to $10,000 5.99% - 35.99% 3 to 72 Months

See representative example

CashUSA.com facilitates ranging loans from $500 to $10,000 from its network of high-DTI-ratio lenders. The loans have repayment terms of three to 72 months.

You must earn an after-tax income of at least $1,000 per month to be eligible. If you qualify, you will be linked to a lender that will specify the loan terms, including interest rates and fees. We like the CashUSA.com website because it offers solid information about various financial topics.

The CreditLoan lending network offers personal loans that range from $250 to $5,000 with terms of three to 72 months. The loan amount, interest rate, and other terms are set by the recommended lender.

To qualify, your income must be at least $1,000 per month. Expect a quick approval decision and funding, with the money electronically deposited into your checking account by the next business day. CreditLoan has helped more than 750,000 borrowers obtain loans since 1998.

Since 1998, Bad Credit Loans has been matching lenders with borrowers who have high DTI ratios and bad credit. The lenders on its network provide personal loans of $500 to $5,000 with payment terms of three to 60 months.

The lenders recommended by Bad Credit Loans will disclose the actual loan interest rate and payback period. As with all these matching services, you are under no obligation and the service is free.

PersonalLoans.com can line up a loan for you that ranges from $500 to $35,000, repayable in periods ranging from three to 72 months. To be eligible, you must receive regular income or benefits of at least $2,000 per month.

PersonalLoans.com is unusual in that it can facilitate loans in all 50 states. The process of applying for a loan and receiving funding is quick, with your money available as soon as the next business day.

  • Short-term loan of $100 to $1,000
  • Bad credit is welcomed
  • Large network of lenders
  • Loan decision as fast as a few minutes; funding as soon as next business day
  • Required: Income of $1000+/month and at least 90 days on job
  • Click here for official site, terms, and details.
             
★★★★

3.9

Overall Rating

Loan Amount Interest Rate Loan Term Loan Example
$100 to $1,000 200% - 2,290% Varies

See representative example

The CashAdvance.com network will consider you for a short-term loan of $100 to $999 without checking your DTI ratio. To be eligible, you must have at least three months on the job and a monthly income of at least $1,000.

CashAdvance.com, a member of the Online Lenders Alliance, has been helping borrowers get loans since 1997. Its large lender network welcomes borrowers with bad or thin credit. Expect funding of approved loans by the next business day.

Debt Consolidation Loans for High Debt-to-Income Ratios

A debt consolidation loan allows you to scoop up some or all of your current loans and put them into one basket. This way, you only have to remember one loan payment per month, and your new monthly payment may be less than the sum of your current monthly payments.

A consolidation loan can be especially useful if it results in a lower APR. The following three companies offer debt consolidation and debt relief services to consumers with high DTI ratios.

  • Requires $10,000 or more in credit card debt
  • Free, no-obligation debt analysis
  • Specializes in credit card and medical debt
  • Also handles debt from personal loans, private student loans, lines of credit, and collections
  • Does not handle IRS, utility, federal student loans or mortgage debt
  • Long-term program to relieve debt over 24-48 month period
  • Click here for sign-up form, terms, and details.
       
★★★★★

4.9

Overall Rating

Better Business Bureau In Business Since Free Consultation? Reputation Score
A+ 2009 Yes 9.5/10

National Debt Relief can consolidate your debt if you owe at least $10,000 in unsecured debt to credit issuers. It’s been in business since 2008 and has helped more than 100,000 borrowers pay off more than $1 billion in unsecured debt.

The company offers a free debt analysis to see whether you would benefit more from a consolidation loan or some other type of debt relief. The company handles debts arising from credit cards, medical costs, private student loans, and personal loans, but not IRS, mortgage, or federal student loan debt.

  • 100% confidential, no-obligation consultation
  • Specializes in unsecured debts over $10,000
  • In business since 2000
  • Options for debt settlement, consolidation, and tax debt
  • Get a 100% free, personalized savings estimate from a debt professional
  • Click here for sign-up form, terms, and details.
       
★★★★

4.0

Overall Rating

Better Business Bureau In Business Since Free Consultation? Reputation Score
(No Grade) 2000 Yes 9.0/10

CuraDebt offers debt consolidation counseling and other services to consumers with high unsecured debts. It has helped more than 180,000 customers since its founding in 2000.

CuraDebt does not offer debt consolidation loans. Rather, it provides customers with 100% confidential consultations regarding debt consolidation and debt relief, including tax debt. One of its debt professionals will be happy to analyze your unique requirements and recommend the most appropriate course of action.

Freedom Debt Relief specializes in debt relief services, including debt consolidation assistance. The company works with an external lender to provide debt consolidation loans to qualified customers with at least $10,000 of existing debt.

The company has helped more than 600,000 clients resolve $5+ billion in debt since 2002. Freedom Debt Relief doesn’t handle collateralized debt, but rather concentrates on debt from credit cards, medical bills, personal loans, and other unsecured debt.

Can I Get a Personal Loan with a High Debt-to-Income Ratio?

Personal loans are available from private networks of lenders, such as the six reviewed above. All serve a wide swath of consumers, including folks with bad credit and/or high DTI ratios.

In other words, whether you have too much debt or a low credit score, your less-than-perfect handling of debt is not automatically disqualifying.

That being said, you should understand how debt affects your credit scores. You may be surprised to learn that your income isn’t part of your credit report, and, therefore, doesn’t figure into your credit score.

FICO Credit Score Factors

Income is not one of the factors used to determine your credit score.

Indeed, you can have a high credit score and a high DTI ratio, or a low score and ratio. However, the most likely scenario for consumers with low credit scores is to have an uncomfortably high DTI ratio.

Otherwise, you would be in a position to increase your score by paying down your debts and reducing your credit utilization ratio (CUR), which is the total amount you owe on all your revolving accounts compared with your total credit available. Since CUR makes up 30% of your FICO score, reducing it can have a major impact on your credit.

If your DTI is so high that lenders won’t approve your loan applications, you can consider a secured loan in which your home or car serves as collateral. Secured loans are much easier to obtain, as they put the lender at much less risk.

In fact, using a secured loan to consolidate your other debt can help you reduce your monthly payments and perhaps your interest rate. On the other hand, secured loans can backfire if you default, as you will probably lose your collateral through foreclosure on your home or repossession of your car.

Naturally, a default will also damage your credit score and will remain on your credit report for seven years. In the long run, your goal should be to improve the balance of your income to expenses so that you have some money left over each month to pay down your debt.

What is a Good Debt-to-Income Ratio for a Personal Loan?

To understand how lenders view a good DTI for a personal loan, it’s useful to first learn how DTI ratio figures into mortgages. There are two types of DTI in the mortgage market:

  1. Front-end ratio: This is the percentage of your monthly gross income allocated to fixed housing expenses, including mortgage payments, homeowner’s insurance, property taxes, and HOA fees. The ideal front-end ratio should not exceed 28%.
  2. Back-end ratio: The percentage of your income to cover all your debt obligations, including housing costs, student loans, car loans, credit card payments, child support, and other debts. The ideal back-end ratio is no higher than 36%.

Although the exact definition of a good DTI ratio varies with each personal loan provider, it’s a good bet that the 36% value is key. It is the more inclusive figure and useful whether you own or rent your home.

However, mortgages are secured, and personal loans are not. It stands to reason that a provider of unsecured personal loans would consider only a lower DTI ratio to be “good” since the lender assumes more risk when a loan is not collateralized.

Therefore, a good DTI ratio for a personal loan is probably 15% or less.

Now, some personal loan providers may accept a higher DTI if part of your preexisting debt is secured — say through a mortgage or auto loan. The reason is that if you default on secured loans, you will probably lose your collateral to extinguish the debt.

In other words, you would no longer be paying monthly mortgage or auto loan bills. In effect, your DTI would fall if you defaulted on a secured loan.

The result would be, all things being equal, more money available each month to repay unsecured debt such as a personal loan. Unfortunately, all things seldom remain equal when you default on a loan.

For instance, if your car is repossessed, you may find it hard to commute to work, threatening your monthly income and your DTI ratio.

How Can I Lower My Debt-to-Income Ratio Quickly?

This is where credit consolidation can be most helpful. To the extent that you can consolidate loans and credit card balances, your monthly payment should decrease and therefore lower your DTI ratio.

Remember, the DTI ratio is based on your monthly debt payments. It is NOT your total debt divided by your annual income. Therefore, smaller monthly payments result in a lower DTI ratio.

Example DTI Ratio Calculation

Bear in mind that credit consolidation is not without its disadvantages. If you pay less each month (without a corresponding decrease in interest rate), your loan will take longer to pay off and probably cost you extra interest.

If you do take a consolidation loan, you should swear off new credit until you repay the loan, lest you be caught in a debt spiral that ends in bankruptcy. Naturally, paying down your debt will immediately improve your DTI ratio.

If you have unused assets you can cash in, you may be able to make a dent in your current debt. Perhaps you have a valuable stamp or coin collection gathering dust, or an antique or art piece you’d be willing to sell. Some folks may decide to downsize their homes to lower their monthly bills.

Whatever steps you can take to economize on your monthly expenditures can help you pay down your debt.

The other half of the equation is your monthly income. Can you increase it?

Many folks looking for extra income develop side hustles, such as freelance work, Uber driving, or Airbnb rentals. Many gigs can be done at home, for example, when you are a writer, graphic artist, programmer, bookkeeper, and so forth. Or, perhaps you can get a raise at work.

Using extra income to pay down your debt will certainly improve your financial health and make it easier for you to obtain a personal loan.

Find Ways to Improve Your DTI

We’ve reviewed several sources of loans for high debt-to-income ratio consumers. The loan matching and debt consolidation services in this article can help you obtain loans despite a high DTI ratio, either directly or through credit counseling.

Arranging a personal loan is easier if you can first pay down some of your debt and reduce your DTI ratio. You can also improve the ratio by finding ways to increase your monthly income, perhaps through a raise, a new job, or side gig. Economizing on your monthly spending, if possible, may allow you to pay down existing debt and keep it low.