The Pros and Cons of Unsecured Debt Consolidation
More and more consumers are finding it's helpful to apply for an unsecured debt consolidation loan than to tie up their assets with a traditional loan. Normally, when you take out a loan, the lender wants you to secure their investment by putting your own assets on the line.
That could be your Portland home, your car, a boat - even a money account you have that the lender could put a lien against in the event you fail to pay your debt to them. Consolidation loans in general are becoming a popular step for American's to take in finding financial freedom.
It gives them the option to lower their interest rate, merge multiple payments (and creditors) into one smaller monthly payment, and improve their credit score significantly as the debt continues to decrease and all other lenders have received their payment in full.
Putting your assets on the line
If you can find a way to get approval for an unsecured debt consolidation loan, then you'll fare better than those who have to put their assets on the line. In the event something happens and you can't pay the loan, you won't worry about losing your home or transportation (among other things).But there are dangers involved as well! Because the lender doesn't have any assurance that it will get their money back, they're going to have to cover their investment by charging you a higher interest rate.
You may actually wind up paying more for your unsecured debt consolidation loan than you would have if you'd used the equity in your home as the security for a traditional secured loan to consolidate student loans and other debts.
Giving Yourself an Education in Unsecured Debt Consolidation
Learn what your options are by boning up on the basics and scouring the 'net for more information!
America's Debt Problems
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The Fundamentals of Debt Consolidation
Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.
Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house. The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.
Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the bad credit consolidation loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.
Why Many Consumers Are Getting Unsecured Debt Consolidation Loans
Don't have a house that you own outright? No car worth its weight on paper? If you have no assets to speak of, you might not be out of luck just yet when it comes to getting an unsecured debt consolidation loan.Many consumers, afflicted with student loan debt, military loans, credit card bills, and high interest rates on other loans, are turning to the option of applying for an unsecured debt consolidation loan to help them get back on their feet.
It may be harder to qualify for an unsecured debt consolidation loan - only because the lender doesn't have any assets to work with that protect them from their own risk. To them, you've proven that you're not savvy about money management - so it's hard to claim that you promise to pay them on time if you're already having trouble paying off your existing debt.
Without collateral, you'll need to show that you can handle the responsibility. It doesn't mean you have to have stellar credit history, either! Many consumers qualify for an unsecured debt consolidation loan with smudges on their credit report.
Your Interest
If you're willing to pay a higher interest rate, then you'll probably qualify more quickly than if you hold out for a competitive one. The higher interest rate still might beat what you're paying on many of the credit cards in your possession.Plus, if you have extra money left each month, you can apply it towards the principal of your loan and pay your unsecured debt consolidation loan off even faster. And think of all of the interest you're saving by paying off multiple debts early!
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Where to Find Approval for an Unsecured Debt Consolidation Loan
Whenever your debt begins to mount, you might start seeing tons of offers roll in for unsecured debt consolidation loans. Somehow, word spreads that you're in financial straits - and there are MANY sharks in a feeding frenzy waiting to hurt (err, help) you out.You have to look out for your own best interest - not those that will fatten the bank account of so-called rescue-lenders willing to bail you out of a dilemma. This isn't permanent - it's a temporary ordeal and you can turn it around in no time if you're willing to shop for the best deal.
Thanks to the Internet, you don't have to get in your car and drive from bank to bank begging for an unsecured debt consolidation loan. The humiliation of being turned down can make many consumers forget about the option completely.
You can now do it from the comfort of your own home, logging onto the 'net 24/7 to comparison shop for a loan that will serve your needs, not the lender's.
But don't just sign up with the first site that says it "guarantees" you'll get approved - do some research!
Even with an unsecured debt consolidation loan, you want to make sure you get the best deal. Some lenders may offer you more money, while others throw in a lower interest rate.Think about the long-term benefits and drawbacks of each offer, not just the short-term luxuries it affords. If it will wind up costing you more in the long run, then you might want to go with a better offer. You have to think of it in terms of your future financial health.
Are You Looking for an Unsecured Debt Consolidation Loan?
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tplus
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karencrosby
Posted October 20, 2007 |
