One of the best ways to make sure you are eligible is to not wait until bills pile up so high you can't pay them all. When the budget starts to get tight look for options and know what is available before you need it. Next look over your budget and get ALL of your expenses put together. Put in averages of monthly expenses for clothing, movie rentals, magazine subscriptions, and even gym memberships. This will help you see how much money you really spend each month. Also note what interest rates you have on the debts as you go through them. With this knowledge in hand you can begin to build a list of debts you can look at consolidating. You don't want to use debts with lower interest rates than the consolidation loan. This could work against you. The idea is to lower over-all monthly payments and save money!!
Another thing to look at is your credit score. Generally speaking a 620 credit score or better will get you a decent loan. A 700 or better should get you the best rates on the market. You will need to have no late payments on your current mortgage for the last 12 months. You will also need some equity in your home to qualify. The more you have paid off on your home the more money you can borrow. Most consolidation loans require a minimum amount between 5,000 and 10,000. There are loan fees also to consider but they can be paid from the loan rather than out of your pocket.
Once an amount is decided take your list of debts and see how many you can pay off. DTI stands for Debt To Income ratio. When you have paid off some debts your DTI needs to be low enough to qualify for the loan. This ratio reflects the amount of income you have and the amount of minimum monthly payment you owe. A DTI of 50% or lower is acceptable for most consolidation loans. This means that 50% of your income goes to pay on the minimum monthly payments on all loans (house, cars, credit cards, etc.) found on your credit report. Family or friend loans, insurance, phone, power, water bills, don't show up on your credit.
Next part is easy. Get all your financial documents together. Then apply for the loan. The loan officer will do the rest!
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