Unsecured Debt Consolidation Loans
Unsecured debt can be defined as any kind of debt where there is no guarantee of repayment by the lender. In the field of finance, unsecured debt generally refers to any kind of financial obligation or debt which isn’t secured by a collateral or guaranteed by a security in the event of default or bankruptcy. A good example of unsecured debt would be personal loans, credit card debt and store cards. Unlike secured debt, unsecured debt doesn’t have an asset securing the loan which can be taken in the event of non-payment. With the advent of the internet and debt relief strategies becoming more prominent, unsecured debt has now turned into one of the most popular forms of unsecured debt.
Unsecured debts are very common, and like any other type, they have their own pros and cons. The most common financial decision to make when you have unsecured debt is which legal entity to use to make the payments. If you are the sole wage earner, then it is likely that your bank or the company that employs you will be willing to help in the payment process. If you have a partner, they may want to play a role as well.
Another decision you have to make is which lender to approach to make the payments. Most people will opt for the first lender they come across however this is not always the best choice. For starters, the interest rates charged by these lenders are usually quite high. You are also required to come up with a large down payment to convince the creditors to help. However if you are running out of cash and don’t have the option of withdrawing the money to pay the creditors off, then the second option is probably the better one.
A third decision you need to make concerns your credit rating. Many of us already have some level of security with our credit rating. It would probably be difficult to start afresh with an unsecured debt. This is because your credit rating is related to the amount of money you have already committed to your debt. As such, if you have bad credit, it is highly unlikely that you will be able to find a company willing to extend credit.
There are alternatives to secured debt repayment that don’t require collateral or a loan. Debt management programs, debt consolidation, debt settlement and credit counseling are just a few options available. Debt management programs can help you reduce the amount of money you repay each month. They often involve negotiating with your creditors and lowering your monthly payments. Consolidation loans help you combine all of your debts into a single loan with a lower interest rate. Debt settlement involves taking a legal action against your creditors in order to reach a settlement agreement.
Credit counseling programs allow you to consolidate unsecured debt without a loan and without going through the court system. The credit counseling services work with your creditors in order to lower your payments, eliminate late fees and keep you out of default. However, these services are not for everyone. If you are looking to take advantage of credit card debt consolidation loans, you will need to show that you can repay the loans.
Once you have decided to take on unsecured debt consolidation loans, you should contact several different lenders. It’s possible that you won’t get the lowest interest rate from all of your competitors. That’s why it is important to shop around. You should also inquire about any and all charges that might be incurred on your loan. Some lenders will charge a one-time administrative fee while others will charge interest on any amount borrowed. Be sure to get all quotes before you agree to the loan.
If the loans don’t go through, the borrowers may still have options for getting the money they need to clear their past due accounts. Borrowers who use their house as collateral can try to sell the house to free up the equity. This equity can then be used to pay off the remaining debts. A tax lien can also be placed on the property to make the borrower liable for taxes on the property. If all else fails, a bankruptcy law will allow the borrower to place the property into a trustee’s sale and clear all debts.