Debt consolidation loans from various financial institutions in Novi are one option to consolidate debts. If the loan has better terms than the consumer debt getting consolidated then the result will be lower interest rates and lower debt payments. The problem usually is finding a debt consolidation loan that has more favorable rates. Doing so all most always requires the debtor to secure the loan with collateral. More often than not this collateral is a residence and the loan is a home mortgage.
An Unsecured Loan
If there is no collateral available or the debtor does not want to provide any then the only option is to get an unsecured loan. Unsecured loans with better interest rates and payment terms than standard “off the shelf” consumer debt can be very hard to find in Novi, especially in today’s credit markets. If credit is not perfect then most likely only a subprime personal loan to consolidate debt will be available. This has a very low chance of improving the debtor’s financial situation and will most likely damage it.
Novi – Personal Loan to Consolidate Debt
When interest rates on student loans rise, many college students begin to consider student loan consolidation. There are both benefits and disadvantages to student loan consolidation. This article explains the pros and cons of consolidating student loans.
Consolidating your student loans locks you in at the current interest rate. This means that, if interest rates rise, you will continue to be responsible only for your original fixed interest rate. Unconsolidated student loans have variable interest rates that fluctuate from year to year.
Consolidation loans generally have longer repayment periods. Unconsolidated student loans have a maximum repayment period of 10 years. Consolidation loans may have repayment periods up to 30 years. This means that monthly payments may be lower on consolidated loans.
On unconsolidated student loans, the government pays the interest on your loans for six months after you graduate. This means that you wouldn't be responsible for a payment during this time. However, consolidating your student loans forfeits this grace period. You will be responsible for payments on your loans immediately after graduation.
If you consolidate, you are locked in at the current rate for the lifetime of the loan. If you don't consolidate, your interest rate will fluctuate depending on economical conditions. It is possible that interest rates will drop lower than the current rate in the future. Visit www.abcloanguide.com for various student loan consolidation services.
If you consolidate under a longer repayment period and make only the minimum monthly payments, you will pay more interest than you would on in a shorter repayment plan. This could cost you thousands of dollars over the lifetime of the loan.
Things You Need to Know Before You Consolidate Debt Loans
Debt consolidation loans are a great way to consolidate debts. If the loan has better terms than the consumer debt getting consolidated then the result will be lower interest rates and lower debt payments. The problem usually is finding a debt consolidation loan that has more favorable rates. Doing so all most always requires the debtor to secure the loan with collateral. More often than not this collateral is a residence and the loan is a home mortgage.
An Unsecured Loan
If there is no collateral available or the debtor does not want to provide any then the only option is to get an unsecured loan. Unsecured loans with better interest rates and payment terms than standard "off the shelf" consumer debt can be very hard to find especially in today's credit markets. If credit is not perfect then most likely only a subprime personal loan to consolidate debt will be available. This has a very low chance of improving the debtor's financial situation and will most likely damage it.
It's Always Who You Know
There is an unconventional source of capital that most people seeking to consolidate their debts with a personal loan don't consider: Friends and Family. If a friend or a family member has low yielding savings or investment accounts they may be willing to lend funds in order to earn a much better rate of return. This is especially true with today's low interest deposit account rates.
As a loan from a friend or family member involves more than just money, both parties must be diligent when entering into the transaction so as to not create strife and hard feelings if the loan goes into default.
The Most Important Consideration Is Risk Assessment
To avoid future problems the lender in the transaction must realistically assess the risk in loaning money to their friend or family. If the borrower is desperate for funds because debt collectors are hounding him or her the risk is most likely going to be higher than what the increased interest earnings justify. In this circumstance the lender should know the chances of the loan getting paid back is low and should not enter into the transaction or price the loan accordingly and then "hold their breath". Whatever the risk, if expectations are not met between the two parties, relationships can get damaged and never be the same.
It does not make sense to earn a higher interest rate by taking a much higher risk not in line with the reward. Therefore, both sides of the transaction must keep emotions out of the risk assessment. It would be very unwise for the lender to let emotions blind them to the real risk of the loan by feeling they have to "help out". There must be no pressure or obligation to enter into the transaction even if not doing so will harm the borrower's immediate cash flow.
The Loan Will Not Be Guaranteed By the FDIC
By taking bank financial institutions out of equation the middle man costs are gone - but so are depositor protections. The lender must be in a position of bearing the total loss of the loan proceeds if this should occur and not use emergency or retirement funds that should not be put at risk.
A high risk loan is more appropriately handled by a high risk lending institution that can recover the loss of a defaulted loan with interest earnings from other loans they have on the books that do get paid back.
The Ideal Transaction
If both parties are "right for the transaction" the debtor can borrow the money at generally a lower rate than what can be found at lending institutions such as their bank or credit union and the lender can earn a better interest rate than leaving their funds in accounts with these same banking institutions.
The key to a happy ending is complete and full financial disclosure and good faith from the borrower fully intending and able to pay the loan back. On the other hand, the lender must play the role of the loan officer and use sound loan underwriting criteria to make sure the loan is a safe investment. The borrower should elicit the lenders help in working out their budget and a loan repayment schedule.
Lastly, properly written and executed legal loan documents are absolutely necessary to avoid the "memory loss" than can occur with verbal loan agreements.