Debt consolidation is the process of taking out a new loan with a lower interest rate and using it to pay off existing debts. However, the qualifications for debt consolidation tend to vary depending on the lender, and the process can be long and tedious. Getting pre-approval for a debt consolidation loan is an easy means to qualify for the loan.
So, Can You Get Preapproved For A Debt Consolidation Loan?
Yes, you can. Getting pre-approval for a debt consolidation loan is a preliminary step towards the loan approval process. When applying for a debt consolidation loan, lenders perform a soft credit check, which doesn’t affect your credit. However, when you apply for a loan, it results in a hard credit pull, which may remain on your credit report for years.
Pre-approval is a free process through which a lender reviews your entire credit history, assets, and income to verify how likely you are to repay a loan. If you do qualify for pre-approval, the lender will provide you with a letter with the loan amount and all the terms.
It’s important to remember however, a debt consolidation loan pre-approval isn’t always promise, and it doesn’t guarantee that you will get that loan. If your financial status changes after obtaining pre-approval, you can still be denied the debt consolidation loan.
How Do You Apply For A Debt Consolidation Loan Pre-Approval?
Fill Out A Pre-Approval Form On The Lender’s Website.
The lender may let you pre-qualify on their website by filling out a form online which include important details such as:
- Personal information such as your name and social security details
- Contact information such as phone number and address
- Income details such as place of employment and annual income
- Financial information such as investments, savings, retirement
- Desired loan amount, repayment terms, and loan purpose
Undergo A Soft Credit Check
Pre-qualifying for a debt consolidation loan will not impact your credit score. On submission of the pre-approval form, the lender will carry out a soft credit check. This helps determine your creditworthiness, which is not usually displayed on your credit report. It’s only after pre-qualifying that a lender can carry out a hard credit check.
Find Out If You Are Preapproved.
The most important factor for lenders is that your credit score reveals the ability to manage debt. This is why it is advisable to build a good credit history that increases the chances of pre-qualifying.
A good credit history can be cultivated through paying your bills on time, paying your credit card balances in full, and keeping your balances low. Pledging collateral when applying for a debt consolidation loan also makes it easier to get preapproved. Adding a co-signer with a strong credit increases the chances of pre-approval.
Passing the soft credit score check increases pre-approval chances, while a failure means you may be denied pre-approval.
Make A Decision
Once you have a debt consolidation loan pre-approval, you now need to make the decision to accept or refuse the offer tabled by the lender. A pre-approval offer lasts up to a month and may differ depending on the lender.
Do’s And Don’ts
- It is important to shop around rather than simply accepting the first offer from the first lender who offers you pre-approval.
- Carefully read through the fine print of the offer before accepting it. Ensure the loan amount, interest rates, and terms of the loan are what you need.
- Do not let a pre-approval expire before making a decision. Pre-approvals are short-term because your financial situation can quickly change.
- Do not borrow more money than you need. It is easy to receive a bigger offer than you needed because you qualify, but it doesn’t mean you should take it.
Pre-approval for a debt consolidation loan gives you a preview of the loan you may receive. Even though it isn’t guaranteed, it is a brilliant step towards the debt consolidation loan approval process.