How To Get The Best Debt Consolidation Loan

loan folder, calculator and penEveryone struggling with debt should have a plan for paying it off. Being heavily in debt just isn’t a good thing. It can cause emotional and physical problems and even tear marriages apart. There are a number of different ways to get debt under control – some of which are better than others. Filing for bankruptcy can get most unsecured debts such as credit card debts discharged in six months or less. But that’s not a great option because of the long-term consequences it would have on your life. On the other hand, a debt consolidation loan can be one of the good ways to get debt under control.

Why a debt consolidation loan?

There are several good reasons for getting a debt consolidation loan and using its proceeds to pay off all of your debts. As the name implies, it’s a way to consolidate debts or combine many of them into a single loan. In most cases a debt consolidation loan will have a much lower interest rate than other types of loans, especially credit cards, and a lower monthly payment.

The types of debt consolidation loans

There are basically two kinds of debt consolidation loans – secured and unsecured. Secured loans are ones where you are required to provide some asset as collateral to “secure” the loan. Unsecured loans are just that – loans where you are not required to provide any collateral.

The best type of debt consolidation loan

Most experts believe that the best type of debt consolidation loan is an unsecured loan. The reason for this is that in order to get a secured loan you would likely have to use your house as collateral, which puts it at risk. If you were to default on the loan, your lender could repossess your house, which would not only force you to move but could wipe out all of your equity. However, getting an unsecured or personal loan can be a problem depending on how much money you would need to pay off your other debts. The top or ceiling for most unsecured loans is $35,000. This means that if you were to need $50,000 to consolidate your debts, you might have a problem getting an unsecured loan in that amount.

Where to get an unsecured loan

You might be able to get an unsecured debt consolidation loan at your bank or credit union. For example, Wells Fargo is currently advertising personal (unsecured) debt consolidation loans. Failing that, you could go to an online lender, as is Springleaf Financial or OneMain Financial. There is also a new form of lender called to peer-to-peer lending. This is where you borrow money directly from an individual or group of individuals with no financial institution involved. The largest of these peer-to-peer lenders is the Lending Club followed by Both offer loans to a maximum of $35,000.

Should you get a peer-to-peer loan to consolidate your debts? This video could help answer this question.

Be forewarned that unsecured personal loans usually have much higher interest rates than secured loans. The reason for this as you might guess is because of the risk factor. When a lender has no collateral it could seize in the event that you were to default on the loan, it needs to charge a higher interest rate to offset the risk.

Define your goals

Should you get a secured or unsecured loan? This will depend largely on your goals. Do you want a lower payment or a faster payoff? If your goal is to lower your payment to the minimum, your best bet would be a secured loan due to its lower interest rate. But it will likely take you much longer to pay off an unsecured loan than a personal loan. If you were to get a home equity loan it’s term would likely be 25 years or longer because it’s basically a second mortgage.


A second type of secured loan is a homeowner equity line of credit ( would have a low interest rate and a term of seven to 10 years. However, its interest rate would be variable and could increase at any time. One of the good things about either of these types of loans is that the interest that you would pay would likely be tax deductible.

Keep in mind that while a secured loan such as a home equity loan would have a lower interest rate, it will cost you more because you would be paying that interest over many more years.

The biggest disadvantage

There is one big downside to any type of home equity loan and that is, of course, the fact that you need to have sufficient equity in your home that you could borrow enough to pay off your debts. If you’ve been in your home for less than 10 years it’s likely that you don’t have much equity because you will have been paying mostly for interest on your mortgage with very little going towards reducing your balance. Plus, most lenders use the 80% loan-to value-ratio. The short explanation of this is that they are unlikely to loan you more than 80% of your equity. So to borrow $50,000 to pay off your debts means you would need roughly $65,000 in equity.

For a faster payoffcheckbook

If your goal is the fastest possible pay off, your best option would probably be a personal loan. They generally have terms of just three to five years. But as noted above, one of these loans would have a much higher interest rate unless you have a very good credit rating.

Weigh the factors

The net/net of this is that before choosing a loan you need to weigh these various factors. Make sure you do your homework and crunch the numbers before you make a decision and you should end up with the best debt consolidation loan for you.

Wells Fargo’s Debt Consolidation Loan Options

As one of the largest and longest-running financial institutions in the nation, Wells Fargo offers a long line of products and services geared toward people’s banking needs. Those looking for debt consolidation loans will find a few distinct options at their disposal. As mentioned, there are two types of debt consolidation loans: secured and unsecured. Wells Fargo places these options at the fingertips of potential borrowers just as many other lenders do.

What are the Eligibility Requirements for a Wells Fargo Consolidation Loan?

For the most part, Wells Fargo holds borrowers to the same criteria as other lenders offering debt consolidation and personal loans. Though the multinational financial services provider extends borrowing opportunities to accountholders and non-customers alike, those who currently have an account with the institution tend to have a better chance of qualifying for a loan. Some of Wells Fargo’s eligibility requirements are:

  • Must have steady, viable income (This is a standard requirement among all lenders as assurance you’ll be able to repay the loan per agreed-upon terms.)
  • Must have a valid, active bank account (Having an account with Wells Fargo makes the process faster and simpler while improving your odds of being approved and potentially receiving a more manageable interest rate.)
  • Should have a credit score falling at least in the high end of the “fair” spectrum by FICO standards, generally 660 or better. (Those with lower credit standings will still be considered, but the chances of being granted a loan are greatly diminished, and interest rates are far higher for those who are approved.)
  • Need to have a debt-to-income ratio of 40 percent or less (Some lenders allow higher ratios whereas others ignore this aspect altogether. Wells Fargo holds customers to this ratio to reduce their risks as well as the possibility of generating financial hardships for borrowers down the road.)

Wells Fargo debt consolidation loan officers take these factors and certain others into consideration when determining eligibility. In terms of leniency, this lender falls somewhere in the middle when compared to others of its type. Though not everyone qualifies for loans under its conditions, many are able to find relief from exorbitant interest rates through Wells Fargo.

The Application Process

Existing accountholders have the option of applying for a Wells Fargo consolidation loan online or even by phone. Others are asked to visit a local branch office to apply in person. With more than 8,000 branches across the nation, finding one nearby shouldn’t be an issue. Either way, potential borrowers must provide certain types of documentation when seeking a loan, such as:

  • Identification and social security number
  • Proofs of residency, like recent utility bills, leases or rental agreements
  • Proof of income, including tax return statements, recent pay stubs, W2s or other forms
  • Rundown of monthly expenses

Applications cover all the typical points, like personal and contact information, income, monthly payouts, amount requesting to borrow, purpose of the loan and other basics. Upon receiving completed applications and required documentation, Wells Fargo runs extensive credit checks and debt-to-income ratio analyses to determine eligibility.

In most cases, applicants are approved or denied within a few minutes to a couple hours after initiating the process. Funds are typically transferred to borrowers’ accounts within 24 hours barring any unforeseen issues.

Basics of Wells Fargo Debt Consolidation Loans

With unsecured loans from Wells Fargo, it’s possible to borrow anywhere from $3,000 to $100,000. Interest rates typically run from 6.99 to 23.99 percent depending on a wide range of factors, primarily credit score and banking history. Borrowers have one to five years to repay these loans with specific terms determined by amount borrowed and other considerations. Though no general underlying charges apply, late payments and insufficient funds cost around $40 per incident.

Secured loans are available in amounts ranging from $3,000 to $250,000 with interest rates spanning anywhere from 5.5 to approximately 14 percent. Lower interest rates stem from the reduced risks generated by collateral. Late fees and NSF charges are the same as those for unsecured debt consolidation loans, and an additional $75 origination fee will apply. Terms run from one to ten years.

Wells Fargo offers the option of direct payment to creditors covered under the debt consolidation efforts in question with both types of loans. Keep in mind, interest rates may vary depending on market conditions at any given time as well as other factors.

Those with Wells Fargo savings accounts may use their existing funds as collateral when applying for secured loans; however, the loan amount offered will most likely be less than the funds available. At the same time, those funds must be left intact until the loan is paid in full.

What if I Don’t Qualify for a Loan from Wells Fargo?

Like other lenders, Wells Fargo may deny applicants for a wide range of reasons. In some cases, it’s a simple matter of not providing the right paperwork during the application process. To avoid being turned away for such a trivial reason, be sure to have your driver’s license, social security card, bank account information, proofs of residency and income and other required documentation on hand when applying.

Low credit scores are another common cause of loan disqualification. Though the institution doesn’t base its lending decisions solely on this factor, it’s certainly a major consideration. If possible, know your credit score ahead of time to avoid going through the application process in vain. In the event your score falls below Wells Fargo’s acceptable parameters, certain steps can be taken to improve your odds later on.

Consider focusing on paying off some of your smaller debts before reapplying for a loan through Wells Fargo. Doing so will go a long way toward boosting your credit score and future borrowing power. This may not be a quick, simple process, but it’s a surefire way to ramp up your credit standing.

Should debt-to-income ratio be the issue standing between you and a debt consolidation loan, taking care of less substantial obligations may be effective in this case as well. Avoid taking out other loans, financing additional purchases or opening any new credit card accounts along the way as this could further increase your debt and damage your chances of future approval through Wells Fargo.

Either way, paying off a single merchant account or auto loan could be all it takes to enhance your creditworthiness and lower your debt-to-income ratio enough to qualify for a debt consolidation loan down the road. You could also open a Wells Fargo account of your own if you don’t already have one to potentially cash in on a lower interest rate and better chances of qualifying. If these options aren’t feasible, other courses of action are available as well.

Other Debt Consolidation Alternatives

For some, paying off smaller debts or waiting months for resolution before qualifying for a loan just isn’t an option. Certain other solutions are at your disposal. Wells Fargo isn’t the only lender out there, so unless you have your heart set on this specific source, you could always turn elsewhere for the money you need.

Some lenders offer loans specially designed for those with lower credit scores, and they help plenty of people who aren’t eligible for a loan through other institutions. Some are also willing to overlook the loan-to-debt ratio issue to at least a certain degree.

If you choose this route, it’s important to keep a few elements in mind. First of all, lower credit scores almost inevitably lead to higher interest rates, so be sure the long-term outcome is worth the immediate risk. Secondly, the fact that a lender doesn’t take heed to your income versus expenses doesn’t mean you shouldn’t. Any extra monthly bill is going to place greater strain on your budget, so do the math and weigh the matter carefully before signing on the dotted line.

Credit Card Hardship Programs

Whether or not this solution meets your needs depends on your specific type of debt. If you’re looking for a consolidation loan to free yourself from numerous credit cards with overbearing interest rates, it may be the best way to go.

Unbeknownst to many, credit card issuers offer hardship programs for cardholders experiencing financial difficulties. Getting through to the proper contacts and proving your current hardship may not be a simple endeavor, but it’s definitely possible. Call each of your credit card’s customer support numbers and ask to speak with their hardship departments. Some provide direct numbers to this division on their monthly statements, but most don’t, so getting through could take time, patience and diligence.

In some cases, you’ll be offered lower interest rates to make payments more manageable. Other card issuers may offer to reduce your minimum monthly payments. For a number of people, this is a positive step toward not only resolving debt but more effectively balancing out their debt-to-income ratios over time and improving their overall credit standings.

Debt Management Plans

For those who are struggling to meet their monthly expenses and have too much debt to qualify for a consolidation loan through Wells Fargo or another lender, professional intervention may be the key to success. Unsecured debt can be mitigated by a debt management plan.

With debt management, a financial specialist weighs your unsecured debt against your income and other expenses to determine how much you can afford to pay creditors each month. From there, he or she will negotiate with your lenders, credit card companies and others in the mix in an attempt to help lower monthly payments or the overall amount owed.

Creditors agreeing to a debt management plan will work with you and your professional go-between to slowly but surely reduce the amount of debt weighing on your shoulders. This isn’t an all-inclusive solution as secured debts like mortgages, car payments and utility bills aren’t included. It’s also not a fast-track route to financial freedom because a plan can take months or years to complete. Still, it’s one possible answer for those who don’t qualify for debt consolidation loans or other options.

Things to Bear in Mind

Several solutions are available to help alleviate debt. Not all of them are right for everyone. For those whose issues stem primarily from credit cards and high interest rates, credit card hardship programs may be the most viable solution. Debt management plans come with professional negotiators who’ll work on clients’ behalves to gain lower interest rates and monthly payments, but they come at a price and don’t cover all forms of debt.

Debt consolidation loans have helped countless people enjoy greater financial wiggle room, and they’re available from a wide range of lenders. Secured loans provide the advantages of more available funds and lower interest rates, but they also generate the risk of losing any collateral offered as backing. In the grand scheme of things, Wells Fargo offers comparable interest rates to many of the other sources out there. The institution also offers higher loan amounts than certain alternatives for qualified borrowers.

Having said that, Wells Fargo isn’t quite as lenient as some lenders in terms of eligibility. In order to qualify for a debt consolidation loan from this provider, you must have a decent credit score and a debt-to-income ratio of 40 percent or lower in addition to meeting certain other prerequisites. For lower interest rates and more extensive options, you must also have an existing account with Wells Fargo.

Bottom Line

Before turning to a debt consolidation loan from any lender, it’s important to consider all the facts. Look at the interest rates, terms and monthly payment amounts being offered to you with a loan. Then, calculate all these factors for the debts you’re hoping to combine and come up with a grand total. Compare both figures to be sure you’d actually be saving money with a debt consolidation loan. Many find this isn’t the case.

Wells Fargo places some attractive offers on the table, but they don’t approve every applicant for a loan. At the same time, their interest rates could be considered a bit lofty for non-accountholders with mediocre credit scores. Don’t hesitate to shop around before committing to a single lender or even a specific debt relief option to be sure you’re truly coming out on top.