Entries Tagged 'Debt Consolidation' ↓

How Secured Loans Can Help

How Secured Loans Can Help

Consumers who need to rebuild their credit histories can take secured loans to start the process. A secured loan is an advance that a lender gives to a person who is willing to offer some type of collateral. Usually, borrowers allow the lending institutions to place liens on their homes or their automobiles to ensure that they repay the loans.

Who Qualifies for Secured Loans

Generally, to receive an unsecured loan, the debtor has to have a credit score of 650 or more. Therefore, those who expect to qualify for these loans should have a credit score in the range of 450 to 650. Some organizations will accept applicants with lower scores than that.

Bad Credit Secured Loans

Any consumer who is 18 years of age or older may apply for secured loans. For the applicant to be eligible to offer something as collateral, the property must belong to him or her. That person’s name must be clearly stated on the ownership document as the owner. The individual must also have identification and proof of income for the lender to consider. If the person meets all the previously stated criteria, the lending organization may approve secured advances.

The Benefits of These Loans

The greatest benefit of secured loans is that they give a person a chance to reestablish a trustworthy payment history. After approximately six months to one year, a debtor will start to see a rise in the overall credit score. Eventually, that person will once again be eligible for traditional unsecured loans and credit cards.

Debt Consolidation Will Benefit You

Debt Consolidation Will Benefit You

If you are like the average person, you probably have a lot of bills that you cannot pay. Each and every month you are probably paying the minimum payment to a few different credit cards and some medical bills. If you are going this rate, you are not going to get out of debt anytime soon. This is why it is always a great idea to consider a debt consolidation loan.

The Debt Collector- Debt Consolidation
The Debt Collector (Photo credit: Wikipedia)

The way that this works is that you will send one check to a finance company who will take the check and divide it among your creditors. Once one of your creditors is paid in full, you will continue to send the same amount of money and that excess money will continue to go towards your bills. Each and every one of your bills will be paid every month. Many people will testify that the amount of money that they were paying was less than the amount that they were paying when they were doing it on their own.

Most people apply for an unsecured debt consolidation loan. Generally, this is a loan to pay off debt that is less than $10,000. If you have more debt than this amount, you may have to apply for a secured loan. This is where you would need a large piece of collateral such as your home.

Honestly, there is nothing that feels better than being free from your debt. If this is something that is holding you back, apply for a debt consolidation loan today.

Fundamental Tips To Debt Consolidation

Fundamental Tips To Debt Consolidation

Debt is the number one problem of almost every household in society today. We all want to live lavishly but have no means or very little means to do so. There is no end to the advertising of material things that would add to our personality and put a huge dent in our pockets! What happens when the dent is so huge that it seems overwhelming? We must lick our financial wounds and try and consolidate debt to make life livable again. In order to do that, we must do some things to consolidate debt without creating more debt.

The Debt (2011 film)

The Debt (2011 film) (Photo credit: Wikipedia)

The first thing to do is to consolidate all outstanding debt if possible. Get all the credit card debt and see if contacting the credit card company and paying at least ten dollars more than the minimum will help to relieve the outlandish interest charged on the principle.

The second thing to do is to establish and adhere to a budget. Plan every activity and plan every dime that is spent for activities so that it is no surprise. Learn to live on less. Eat out less often. Eating out is a major expense that can cause major debt in more than one way. The last thing to do is to try to curtail all unnecessary expenses like cable, internet and other “luxuries” to a bare minimum. Cell phones should be a bare minimum expense. Try to spend money on only what is needed and not what is a desire. These tips can help with debt consolidation and decrease debt also.

Unsecured vs Secured Personal Loans – What You Need to Know

Unsecured vs Secured Personal Loans – What You Need to Know

If you are looking for more information about the difference between secured personal loans vs. unsecured personal loans, then you have come to the right place. Also, this article will cover debt consolidation and where you might apply for them.

Secured Personal Loan

Secured personal loans are bound to an asset that are deemed collateral for your debt. Loan providers place a lien relating to the asset, providing them with the justification to take your asset in case you default with your payment obligations. In case the loan provider needs to take the asset as a result of your delinquency, your asset is going to be offered for sale. In case the price for your asset does not entirely take care of your debt, the lending company may possibly go after you so you could cover the difference.

English: Online Loans Today, All Loans in One ...

English: Online Loans Today, All Loans in One Place (Photo credit: Wikipedia)

Home loans and motor loans both are good examples of secured loans. The home loan is secured by the house. In the same way, the auto loan is then secured by the motor vehicle. Should you turn out to be delinquent on these kinds of loan repayments, the lending company may decide to foreclose or claim the house.

Unsecured Personal Loan

With unsecured loans, loan companies do not have the rights to any sort of collateral for your financial debt. In case you fall behind with your payments, they do not have any rights to claim any asset of yours. Nevertheless, the lending company might take different measures to force you to cover your debt. For instance, they might employ the services of a debt collector in order to coax you to pay your debt. In case that does not do the job, the lending company might file a lawsuit and request the legal court to deduct your salary, claim an asset, or place some sort of lien upon your assets unless you have covered the debt. They will also declare your delinquent state towards the credit reporting agencies so it could be reflected on one’s credit history.

Personal credit card debt is considered the most common unsecured debt. Some other unsecured loans include court-ordered child support, medical bills, payday loans and student loans.

Debt Consolidation

Debt consolidation is a kind of loan that lumps up your entire existing loan into one big loan. The biggest advantage to this is that the monthly payments are usually smaller. The interest rate is typically smaller. Debt consolidation is still considered as a loan. Therefore it can be secured or unsecured. Banks, debt Consolidation Companies and other financial institutions typically offer unsecured or unsecured debt consolidation loans.

Debt Consolidation with Peer-to-Peer Lending

Debt Consolidation with Peer-to-Peer Lending

Personal loans, debt consolidation loans and home loans were once the exclusive products of banks, but this is no longer the case. Those struggling with money problems now turn to companies like P2P loans, payday loans, family loans and Prosper in order to reduce monthly repayments and keep household bills in-check.

Secured Loans and Debt Consolidation

Having bad credit normally means that unsecured loans aren’t a realistic option due to the high APR. This means that many borrowers that are seeking debt consolidation opt for secured loans. Is it really a sensible idea to turn unsecured debt, such as credit card debt, small unsecured loans and personal overdrafts, into a secured loan?

Secured Debt Consolidation and Creditor Harassment

A secured loan provides collateral for a lender, providing it with far greater powers to recover debt in the event of loan default. It can lead to creditor harassment for up to 12 years in event of house repossession and resultant negative equity. Rather than get a secured loan, commencing a debt solution could prove to be a more effective alternative.

Whilst debt consolidation has too many negatives for those with bad credit, it could prove a useful option for those seeking to protect a good credit rating. Those that do have bad credit may be better served by choosing a debt Consolidation solution, such as an Individual Voluntary Arrangement or debt management plan.

Good Credit two major P2P sites — Prosper and Lending Club Loans

P2P loans are a peer-to-peer lender, which means that people lend to people. P2P loans offers good credit customers a low APR personal loan over 3 years. A customer can pay back their personal loan early should they wish. Unlike a payday loan, a P2P loan isn’t suitable for those with bad credit. Individuals that have missed payments or defaulted on a loan should seek an alternative source of finance.
No Credit Check Payday Loans

Payday loans are designed specifically for people with bad credit and don’t involve a credit check. A payday loan isn’t a debt consolidation loan, it is there to help people deal with a short term money problems, such as paying the rent or mortgage. The main problem with payday loans is the high APR so they should only be used in an emergency situation.
Get a Family Loan to Resolve Money Problems

Getting a family loan is a perfect solution for those with money problems, especially when bad credit is an issue. A family loan allows someone to borrow money from friends or family at a low APR, often interest-free. The only real issue is not being able to pay back the personal loan should further money problems arise.
Prosper Personal Loans

Specializing in US customers, Prosper offers personal loans to customers with average credit or a good credit history. Being a peer-to-peer lender, Prosper personal loans operate on a similar platform to P2P loans. Prosper are particularly useful to US customers as only homeowner loans are normally available to them.

Those experiencing money problems should always see if a family loan is possible before checking other sources of personal loans. People with bad credit will find that personal loans charge a high APR of 50-60% or higher in the case of payday loans. Good credit customers should use either an online loan comparison service or see if they can get a personal loan from peer-to-peer lender, P2P loans.

Is Taking out a Personal Loan for Home Improvements Sensible?

An unsecured personal loan can be an excellent way to perform home improvements as it can help to build home equity. However, it is important for those seeking to borrow money can afford the monthly repayments and have job stability. Avoid home improvement loans when bad credit is an issue.

Having access to personal loans can open up many avenues to a borrower, including debt consolidation, home improvements and even buying a car. Those with a bad credit rating may find that paying a high APR makes unsecured debt consolidation unattractive.
Doesn’t a Charging Order Turn Unsecured Debt into Secured Debt?

It is true that a lender can get a charging order and turn unsecured debt into secured debt. However, the process of getting a charging order is very involved and means that a lender has to register a County Court Judgment or CCJ against a borrower before this can even be contemplated. Should a borrower come up with a repayment plan, a charging order could be prevented by a judge.

Consider a Debt Solution before Getting a Secured Debt Consolidation Loan

Unless someone has a job that depends upon good credit, it is worthwhile considering a debt solution, such as a debt management plan, when experiencing money problems. Getting a secured debt consolidation loan could serve to worsen money problems, especially if the borrower fails to close down sources of credit that had been consolidated by a homeowner loan.

What If Your Credit Rating Isn’t as Good?

Even if a lender does agree to loan you the money, those with adverse credit will have to pay a higher rate of APR. You will normally need to be a home owner and your loan will be secured on your property. You will also need to have sufficient equity in your property.
There are some unsecured loans available, but most will attract a rate of interest in the region of 25%. If you are paying more attractive rates on your other credit agreements it is highly questionable whether you should consolidate.

What Type of Loan?

If you have the choice an unsecured loan should almost always be chosen for two critical reasons.

If you do encounter financial difficulties you can enter a Debt Management Plan or an Individual Voluntary Arrangement, particularly if you have gambling debts. It gives you a greater range of options should you end up in a position where you lose your job or your personal circumstances change.

As you aren’t utilizing the equity in your home, it will be easier to attain secured finance should you ever desperately need to. This gives you another chance should the unexpected happen.

Turning unsecured into secured debt is a serious business, but there are genuine reasons why it should still be considered.

A secured loan will normally allow you to get a better rate of interest. The reason for this is that the creditor is afforded greater protection.
Those with bad credit are unlikely to be able to get any other kind of loan. There may be no other choice.

You will be able to repay the loan over a longer period of time which means that your monthly payment will be lower and more affordable. It is, however, important to be aware that the longer the loan the more interest you will pay over the duration.

Consolidation loans provide people with simpler, more manageable finances. You can’t put a price on having a payment structure to your debt and knowing that in a certain number of years that debt will be completely paid off.

Seek Financial Advice

Before proceeding with any type of debt consolidation it is advisable to consult an independent debt advisor to make sure that the loan is right for your personal circumstances.

How You’re Wrong About Debt Consolidation

How You’re Wrong About Debt Consolidation

With so many mixed messages presented by so many different sources, it can be difficult to know which to believe when it comes to finances. Facts can be misrepresented and myths develop a life of their own. But if you find yourself reading this article because you’re considering debt consolidation, read on. There are three myths that will be debunked in the following paragraphs.

Myth #1—Debt consolidation causes damage to your credit rating

In reality, the act of debt consolidation is a way of better managing your debt so that your credit report is NOT totally damaged. Consolidation shows that you are serious about paying off the debt. In fact, putting all of your debts together in one loan often shows up on the credit report as balances being paid off.

For example, assume you had a $2000 balance on a credit card that charged 12% interest, a $5000 balance on a different card that charged 15% interest and a $3000 balance on a third card that charged 18% interest. If you went to your bank and negotiated a loan for $10,000 at 10% interest, you could pay off all three credit cards with the money from the loan and save money on interest in the long run, too. In addition to only having one debt payment each month, you have shown those three credit cards paid off on your credit report.

What’s the catch? Well, it’s simple. You have to make your payments on the consolidated loan in full and on time to maintain the good credit standing.

Myth #2—Debt consolidation is the same thing as debt settlement or bankruptcy

Actually, the three are very different approaches to resolving debt. Debt consolidation is a strategic plan to pay off all of your debt. Debt settlement, on the other hand, is an attempt to reduce the amount you owe to various creditors to help resolve unpaid balances. Bankruptcy is the most complicated of the three because it involves court proceedings and a judge. Additionally, bankruptcy stays on your credit report for a number of years and will affect your ability to acquire loan money in the future.

Myth #3—Debt consolidation costs you more funds over time

The common argument that created this myth is that consolidation loans are only able to lower your credit payments by extending the life of each loan. An extended loan means you pay interest for a longer period of time. So, under certain circumstances this myth can be true. However, it is not universally true and does not HAVE to be true for you.

Take the earlier example as a case study. If everything else remained the same (length of loan, minimum payment, etc.), you would save approximately $45 each month in interest charges by consolidating at 10%. Choosing to apply that $45 to the remaining balance on your loan would serve two purposes: paying off the loan faster and paying even less interest. Take time to do the math to determine what would be the most beneficial for you financially over the course of the loan. Resist the temptation to assume the worst because you heard a myth.

Tiffany Marshall is a freelance writer who writes on behalf of the debt collection professionals at Direct Recovery. Call them for some of the lowest debt collection rates in the industry.