How and when to get a $10,000 debt consolidation loan

There’s something powerful about the moment when you decide to stop letting money decisions happen to you and you start making choices that put you in charge of your money. You already have the tools you need to create the financial life you want. 

Sometimes, it makes good financial sense to borrow new money to get rid of old debt. Here's what you need to know to determine if a $10,000 debt consolidation loan is right for you and how you might qualify.

When is a $10,000 debt consolidation loan a good idea?

A personal loan for debt consolidation could streamline your finances, lower your monthly payments, and save you money on interest. 

You may be a good candidate for a $10,000 debt consolidation loan if:

• You have multiple higher-interest debts. 

• You're making the minimum payments on your debts and are making little progress paying down your balances. 

• You want a fixed monthly payment with a set payoff date for the debt.

• You qualify for a loan with a lower interest rate than the debts you want to consolidate.

Can you qualify for a $10,000 loan?

Many lenders offer $10,000 personal loans. Approval requirements vary, but generally, lenders consider the following factors during the approval process: 

Credit score: Qualifying for a personal loan with fair to good credit may be possible. What credit score do you need for a personal loan? Many lenders require at least a 620 credit score. 

If you prequalify for a debt consolidation loan with an interest rate higher than your other loans or credit cards, consider improving your credit score before applying.

Income: Lenders will verify that you have enough consistent income to afford your monthly personal loan payment.

Debt-to-income (DTI) ratio: Your DTI is a calculation of how much you pay towards debts and housing each month compared to your pre-tax income. You can apply for a debt consolidation loan with a DTI of 43% or lower. If your DTI is higher, talk to the lender about your options.  You can use a debt-to-income ratio calculator to calculate your DTI.

Is a $10,000 consolidation loan affordable for you?

You don’t want to end up in debt again. Consider the monthly payment amount and total borrowing costs to decide whether you can afford a $10,000 debt consolidation loan.

Here are three $10,000 debt consolidation loan examples: 

A lower APR will result in lower borrowing costs. You can expect to pay more in interest on a loan with a higher APR. Compare the interest rate to the rate on the debts you want to consolidate. For example, if your credit card debt average rate is 25% and you qualify for a personal loan with an 18% interest rate, the consolidation loan might be a good move.

What if the loan doesn’t work for you?

Debt consolidation loans aren't ideal for every situation. 

If you think you won't qualify for a debt consolidation loan or if the rates you qualify for are too high, here are some debt consolidation alternatives. 

DIY debt payoff

A DIY approach to debt payoff is possible. Decide on a debt payoff strategy that’s right for you, like the debt snowfall or debt avalanche method, and outline a plan to tackle your debt. This solution is ideal for those who have extra income, even a little, to put toward debt and are comfortable managing their finances. 

Debt management plan (DMP) 

A debt management plan (DMP) set up by a credit counselor is a customized three to five-year plan to fully pay off your unsecured debts. Once enrolled, you'll make one monthly payment to your credit counselor, and they will pay your creditors. 

A DMP won't reduce the amount of debt you owe. But you may be able to get your creditors to lower your interest rates or waive some fees. Monthly DMP payments can be high.

Debt resolution

Debt relief involves negotiating with your creditors to reduce the debt you owe. Your creditors may agree to partial debt forgiveness in exchange for a lump sum payment or a series of payments if it’s clear that you have a hardship and can’t afford to fully repay your debts. Debt relief could help you get out of debt faster and pay less in interest. You can negotiate with creditors yourself or work with a debt relief company. 

Hardship program 

Hardship programs offer temporary relief when experiencing significant life changes that impact your finances, such as divorce, job loss, or the death of a spouse. 

A hardship program could offer the following: 

• A payment pause

• Reduced payments

• Loan modification 

Talk to your lenders and creditors to see if they offer hardship programs, and to learn what financial hardships qualify and what kind of relief may be available. 

Here’s an overview to help you determine which solution is best for your situation: 

Related: Debt relief vs. debt consolidation 

What’s next?

Consolidating $10,000 of debt is possible! Bravo for taking the initiative to learn about your options. Here are some next steps to take on your quest toward your new financial future: 

1. Get prequalified. Many lenders offer personal loan prequalification with no impact on your credit, so you can estimate what your loan rate might be. 

2. Review your credit and income situation. Understanding where your finances and credit stand can help you to choose the right debt relief strategy for your situation. 

3. Pick a target debt payoff date. Set a goal and create an actionable debt-payoff plan. 

4. Take action. Apply for a debt consolidation loan or explore other debt relief alternatives.