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How to Get a Loan with a High Debt-to-Income Ratio

How to Get a Loan with a High Debt-to-Income Ratio

by

JG Wentworth

February 16, 2024

8 min

getting a loan with a high dti

Securing a loan when you already have a high debt-to-income ratio (DTI) can be challenging, but it’s not impossible. Whether you’re looking to consolidate existing debt, fund a major purchase, or cover unexpected expenses, understanding how to navigate the lending landscape with a high DTI is essential. Let’s explore strategies and solutions to help you obtain a loan even with a high debt burden…

Understanding Debt-to-Income Ratio  

DTI is a financial metric that compares your monthly debt payments to your gross monthly income. It’s expressed as a percentage and provides lenders with insight into your ability to manage additional debt obligations. 
 
To calculate DTI, divide your total monthly debt payments by your gross monthly income and multiply by 100. For example, if your total monthly debt payments are $2,000 and your gross monthly income is $5,000, your DTI would be 40% (2000 / 5000 * 100). 

Understanding the Impact 

Lenders use DTI to assess your financial risk and determine your eligibility for a loan. A high DTI suggests that a significant portion of your income is already allocated to debt payments, which may make you a higher risk borrower. As a result, a high DTI can make it more difficult to qualify for loans, as lenders may be hesitant to extend credit to individuals with already strained financial circumstances. 

Strategies for Obtaining a Loan with a High DTI 

While a high DTI can make securing a loan more challenging, there are ways you can improve yours before applying: 

  1. Pay Down Existing Debt: One effective strategy is to focus on paying down existing debt before applying for a new loan. By reducing your outstanding balances, you can lower your DTI and improve your chances of loan approval. 
  2. Increase Income: Another option is to increase your income by taking on additional work or seeking opportunities for career advancement. A higher income can offset a high DTI and make you a more attractive borrower to lenders. 
  3. Explore Alternative Lenders: Online lenders often have more flexible lending criteria than traditional banks and credit unions. They may be willing to work with borrowers with higher DTIs, especially if they have other positive financial attributes. Additionally, peer-to-peer lending platforms connect borrowers directly with individual investors. These platforms may be more willing to consider factors beyond DTI when evaluating loan applications. 
  4. Consider a Secured Loan: Securing a loan with collateral, such as a vehicle or real estate, can mitigate the lender’s risk and increase your chances of approval. However, it’s essential to consider the potential consequences of defaulting on a secured loan, as you could risk losing the collateral. Pursue this option only if you know you can pay off the loan within the mandated timeframe. 
  5. Seek a Co-Signer: If you have a trusted friend or family member with strong credit and income, consider asking them to co-sign the loan. A co-signer with a lower DTI can strengthen your application and improve your chances of approval. 
  6. Apply for a Smaller Loan: Requesting a smaller loan amount can reduce the impact of your existing debt on your DTI ratio. This may increase your chances of approval and make the loan more manageable from a repayment perspective. 
  7. Present a Strong Loan Application: When applying for a loan, emphasize positive aspects of your financial profile, such as a stable employment history, a high credit score, or a history of timely debt repayment. Providing additional documentation or context for any negative factors can also strengthen your application. 

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Step 1 of 4 - Debt Amount

Choose your debt amount

$5,000 $25,000+

How JG Wentworth Can Help 

If you’re struggling with a high DTI and are feeling overwhelmed, we might be able to help. Our Debt Relief Program has helped countless individuals pay down their debts faster, and frequently for less than what they originally owed. * 

  • Average clients become debt-free in as little as 24-48 months. 
  • Average clients save up to 50% before program fees
  • We don’t get paid unless we resolve your debt. 

While a high DTI can present challenges when seeking a loan, it’s not an insurmountable obstacle. By implementing proactive strategies and exploring alternative lending options, individuals with high debt burdens can still access the financing they need. Whether through debt reduction, alternative lenders, secured loans, co-signers, or smaller loan amounts, there are solutions available to help borrowers navigate the lending landscape and achieve their financial goals. 

As always, it’s essential to carefully consider your options, assess your financial situation realistically, and make informed decisions that align with your long-term financial well-being. And should you need help with resolving your debt, don’t hesitate to contact us. Our debt relief experts are ready and waiting to see if your debt qualifies for our program and will happily walk you through the process every step of the way.  

The information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions. 

Sources Cited

Murphy, C., “Debt-to-Income (DTI) Ratio: What’s Good and How To Calculate It.” Investopedia. August 21, 2023. 

Goodshore, C., “Traditional Banks vs. Alternative Lenders: Which Is Better for Business Financing?” Business.org. May 3, 2022.  

Treece, K., “Best Peer-To-Peer Loans Of February 2024.” Forbes. February 1, 2024. 

Bareham, H., “How do secured loans work?” Bankrate. January 5, 2024. 

Marquit, M., “How to Fill Out a Personal Loan Application.” Investopedia. December 8, 2023. 

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* Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 43% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”)). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required. 

Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment.