Monthly Archives: October 2016

Personal Loans

The financial crisis or the economic downturn of 2008 saw not only the bottom fall out of the real estate market but the high-interest rates also had its impact on the creditworthiness of several other people outside the housing loan / mortgage finance segment. Personal debts also increased multi-fold with people looking at increased payouts primarily from payouts towards credit card outstanding amounts. In addition, rising costs of utilities, retail shopping and medical bills forced many to borrow to pay their bills. The resulting situation was a high degree of unsecured debts which left even many high-earning individuals in dire straits as losses accumulated and assets fell short of their market value.

There are many debt relief options to help deal with unsecured debts; one of them is availing a Debt Solidification Loan. But understanding what a debt Solidification loan provides in terms on debt relief is very important so as to analyze all the options.

A debt Solidification loan is only a part of the debt relief process – other options include Debt Settlement and at the worst level, Bankruptcy.

Let’s take a look at what a debt Solidification loan involves.

Typically, it means combining or putting together all high-interest credit card dues into a much lower interest loan payout. It can also mean ‘Solidification’ of all credit card dues into a more structured and manageable payout schedule to a credit counseling agency, which in turn dispenses payments to individual creditors.

Debt Settlement is another option of debt relief where there is the hope of negotiating outstanding payments with creditors to arrive at a substantially less payout than the actual debt. These debt relief methods are providing alternate means to declaring a person ‘bankrupt’ which has a damaging and devastating impact on personal credit in the long-term.

Hence, debt Solidification represents a wide variety of debt relief options; however, unlike a debt Solidification loan, it involves ‘Solidification of all debts’, including unsecured debts, into an affordable and manageable repayment monthly payout scheme, details of which are advised by a credit counseling agency. This kind of debt Solidification is sometimes referred to as a DMP or a Debt Management Plan.

A Debt Management Plan is seen as a smart move to get out of bad debts; however, going in for a debt Solidification loan requires the person availing the loan to put up some kind of collateral as risk-insurance. This effectively means that in case of default on repayment, the collateral may simply slip out of hand.

A personal loan is just what it means. It is a personal loan taken at a low-interest, long-term schedule to repay old or bad debts, typically credit card outstanding dues. In short, it means paying off ‘old debts with a new loan’. For consumers who cannot be counted to exercise discipline in curbing credit card expenditure, this simply leads to further outstanding and overstretched payments, sometimes defaulting again eventually leading to a worse debt scenario.

Comparison between a personal loan and a debt Solidification loan can provide varying results; what works for one may not work for the other. However, where there is involvement of a credit counseling agency, the debt repayments are consolidated into an affordable repayment plan and a planned schedule is maintained.

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How To Apply For A Personal Loan

Personal loans are loans granted to a person by a financial lending institution. The repayment of the loan is agreed upon by the lender and recipient upon approval of the loan. These loans are different than vehicle or home loans because the amount borrowed is generally much lower. When applying for a personal loan, the financial institution will look into several different factors to decide if a person qualifies. The lender will considers a persons credit score, unsecured debt, current bills, income, and how much the asking amount is for.

A persons credit score is a number lenders will use for any loan. This number fluctuates when businesses report the repayment status of financial obligations. Medical bills, credit cards, living expenses, and other bills a person may have will report to the credit score. When a person repays on time without any delinquencies or if they are delinquent on payment it will reflect. If a person files bankruptcy, it will reflect in the credit score report. The lending institutions generally require the credit score to be a certain number before they even consider a loan granted. The credit score will also determine if the person needs a cosigner for the loan.

Unsecured debt is any debt with a fluctuating interest rate. This could qualify as credit cards or balloon payments on a vehicle or house loan. Unsecured debts are a dangerous factor in the equation because they are at risk of getting out of control and could prevent the lender from receiving their monthly payment. Before applying for a personal loan, it is best to minimize as much unsecured debt as possible. When the debt is minimized it will increase your credit score and reduce a persons monthly budget giving them a better chance of being approved for the loan requested.

Lender’s take into consideration a persons current living expenses. These living expenses include monthly rent or house payment, utilities, food, vehicle payment, insurance, and gas. All of these expenses are required to live on a daily basis. The lender will take into consideration if there is roommates or if the person pays the entirety. Lender’s also prefer to see these expenses combined leave the person with a certain percentage of your income free to ensure the loan repayment will be done successfully. If the living expenses are a majority of the income, it is best the borrower try and find a supplemental job to offset the formula the lender uses to determine if they qualify for a loan.

A person must bring proof of income when applying for a loan. Generally the lender will request a minimum of three months proof. The lender will consider the longevity at the employment position, how much a person makes hourly or salary, and if there are any court ordered garnishments taken out of the checks. The lender will calculate your income into the equation and also take into consideration if a person already has some money in the bank. The lender likes to a there is some money saved up for emergencies. With a saving account built up there is a less likely chance of a person defaulting on the loan.

Once the information is presented to the lender it will be sent over to the underwriter’s department to make the final determination if the person qualifies. If needed, the underwriter’s will then request any additional information. Upon approval is when the person will sign the financial contract with the lender and the money is received. At anytime during the signing process and after the borrower is welcome to call the financial institution if they have questions.

Author is an expert writer at http://www.IndiaLends.com. Browse our site get to know more information the best personal loan offers with low interest rates and how to apply for personal loans online in India.