The majority of people go through their lives carrying debt. The average American has over $25 thousand racked up giving them huge monthly payments. Having debt has become the norm, which is not a good situation. So, what is the solution to this? Ideally, debt is not a death-end situation. Fortunately, an aspiring homeowner can still get loans for a high debt-to-income ratio. DTI, or debt-to-income, is a tool that lenders use to determine the percentage of your income that goes toward paying off debts. If you find yourself with a high debt-to-income ratio, you may want to consider debt settlement services to negotiate an agreed payoff based on what you can afford on a monthly basis.
Calculating the formula of DTI is quite simple. You need to divide your monthly debt payment by your monthly income. For instance, if your monthly debt is $2000 and your monthly gross income is $3000, your debt-to-income ratio is 66.67%. Generally, a good DTI is around 36% or less, not over 43%. It is because a higher DTI can result in a turn-down mortgage application. Debt consolidation with a high DTI can be very difficult, but different strategies and loans exist to achieve this goal. Specific high debt-to-income ratio loans are designed to help people having higher DTI.
Home Equity Loan
It is a secure loan in which a borrower gets funds in exchange for offering home equity as collateral. It allows the lenders to perceive the borrower as having a very lower amount of risk. Therefore, lenders are more willing to provide the loan. However, the loan amount is determined by the value of the property as determined by an appraiser.
Debt Consolidation Program
When a company works with lending agencies on your behalf to negotiate, better terms is called a debt consolidation program. They expect the risk and loan payments to go to the company on your behalf instead of a lender. Many government approved debt consolidation programs are specially designed for people looking to get loans for a high debt-to-income ratio. Some highly-rated lenders help borrowers eliminate credit card debt and improve their credit scores.
Secured Personal Loan
Most personal loans are unsecured loans. It means that you don’t have to put up collateral. However, if your DTI is higher or your credit score is too low to get unsecured loan options, the chances of qualifying for a secured personal loan are higher. While lenders always want to provide you with a secured personal loan when you have a high DTI. Instead, they offer you a secured personal loan.
However, the major difference between secured and unsecured personal loans is that a secured loan needs you to put down collateral. Keep in mind that the collateral can be anything. Lenders are preferably provided with secured personal loans for high debt-to-income ratios because, in the event of non-payment by the borrower, the lender can still have the authority to collect on something of value.
Loan with a Co-Signer
To qualify for loans for a high debt-to-income ratio, lenders have many requirements that you must meet, like minimum credit score or income requirements. If you are not able to fulfill these requirements, a co-signer can help the lender feel more comfortable providing you with the loan. If you don’t, someone else is pledging to repay the loan on your behalf. This type of loan is considered less risky.
Peer-to-Peer Loans
Personal loans always take place between a borrower and the company. After the rise of the internet and its ability to connect people, you can get money directly from investors or through the peer-to-peer lending model. These types of loans are native to the digital world. Many investors are still lending this way, which can be an ideal loan option for borrowers with high DTI.
Conclusion
A debt consolidation loan is usually a perfect option for high DTI. It reduces the number of monthly payments you make on your debt. Additionally, it also reduces the interest rates you pay. While it may be rare, some lenders offer debt consolidation loans for a high debt-to-income ratio. Remember that a high DTI is temporary. It can be difficult to combat, but you can easily lower your debt-to-income ratio with the right amount of discipline.
Salman is a prolific environmental writer, and has authored more than 500 articles in reputed journals, magazines and websites. He is proactively engaged in creating mass awareness on renewable energy, waste management, sustainability and conservation all over the world.
Salman can be reached on salman@cleantechloops.com
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