How To Get An Unsecured Debt Consolidation Loan
An unsecured debt consolidation loan is also called a personal loan or a signature loan. When you have a number of smaller, high interest loans, it makes sense to contact a lender about a personal loan. This way, you can pay off all of your bills in one fell swoop and then make one payment each month to a bank. This is what an unsecured debt consolidation loan can do for you.
There are two types of debt consolidation loans. The first is the home equity loan. This means that you take out a second, third, or even fourth loan on your home. A home equity loan generally offers better terms than does an unsecured debt consolidation loan.+
But these days, home equity loans are hard to get. Not only have the credit markets dried up, banks are also being more discerning about how the loan against homes. It used to be that you could get 125 percent of the value of your home in loans. Today, banks often don’t want to lend more than 80 percent.
And, because the home markets have declined, you may be in a situation where you already owe more than the home is worth. That means that you’re looking at an unsecured debt consolidation loan to take care of your debts.
An unsecured debt consolidation loan will effect your credit.
At the very beginning, your credit scores may dip as you pay off and close accounts and receive a new high balance loan. But, if you make the payments on your consolidation loan faithfully, you should see an overall rise in your credit score within six months. The increase could be considerable.
There are two ways to obtain an unsecured consolidation loan.
The first is to look at debt consolidation loans through traditional lenders. You can search the internet for free debt consolidation loans which will give you a number of quotes at one time, or you can go into the bank where you do business and ask to speak to a representative about a signature loan for the purpose of debt consolidation.
The second way is to work with a debt consolidation company directly. They will arrange to have all of your debts paid off. You will then make one payment to the company per month. There are non-profit and for profit debt consolidation companies out there. Both have merits. However, there are some unscrupulous for profit debt consolidation companies, so do your homework before signing any papers.
Because the loan is unsecured, you do not put up any collateral. This means the loan can be received fairly quickly as the bank does not have to value any assets.
Traditional banks will want to do a credit check before they lend you an unsecured debt consolidation loan. If you have late payments on your multiple debts, this can be problematic.
Debt consolidation companies, on the other hand, are used to seeing people in your financial situation, and have plans and policies for almost every person. You should contact a debt consolidation company as one of your options when trying to secure an unsecured debt consolidation loan.In the past, home buyers more or less had limited mortgage loan options. These days, there are more options than you can shake a stick at, but here’s a primer on the basics.
Types of Loans
With the real estate market explosion over the last 10 years, a call has gone out for unique mortgage loan programs. Bankers have been more than happy to answer the call. For many borrowers, traditional mortgage loans still fit the bill.
Here’s an introduction.
1. Conforming Loans – The loans comply with requirements set down by Fannie Mae and Freddie Mac, two government sponsored entities that buy and sell loans from mortgage lenders. These entities put strict caps on the loans they will buy, with single-family homes having a mortgage cap in the range of $360,000. With the booming real estate market, many areas such as San Diego do not come close to fitting into the conforming loan market since homes average in the $600,000 range.
2. Non-Conforming Loans – Known as “Jumbo Loans”, these mortgages are written for loans that exceed the $360,000 cap mentioned previously. They tend to have slightly higher interest rates, but are readily available.
3. Bad Credit Loans – In the mortgage industry, mortgage brokers often refer to a borrower’s “paper.” This paper refers to people with less than stellar credit. “B” paper refers to relatively small problems, while “D” paper refers to bigger issues such as bankruptcy filings. The worse your paper, the more you can expect to pay in interest, points and down payment amounts. You need to carefully determine whether paying these extra penalties makes financial sense.
With each of the above loans, you’ll have an option of going with a fixed interest rate or an adjustable rate. Fixed interest rates simply set a definitive interest rate that will be charged over the length of the loan. Adjustable rates typically start at a figure lower than fixed rates, but can be moved up to reflect changes in the cost of borrowing money. In many ways, you are betting whether interest rates will increase in the future.
For a great majority of people, basic mortgage loan options still suffice when it comes to borrowing money. Don’t fret if you have problems qualifying for these loans. There are many other options on the market these days.