Debt consolidation loans from various financial institutions in Jackson 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 Jackson, 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.
Jackson – Personal Loan to Consolidate Debt
Debt consolidation loans are debt loans that are issued specifically to pay off an individual's multiple loans. After this, the individual is left with a single loan and a single monthly payment to take care of. Debt consolidation loans help in lowering the interest rates paid on loans by paying off the high-interest unsecured loans with a low-interest secured loan. Normally, the high-interest unsecured loans are credit card balances or medical bills. Since they are unsecured, the risk is high for the lending agency or bank, and so the interest rates are high. Taking a debt consolidation loan by placing one's home as collateral would enable one to get a loan at a lower interest rate, since the loan is secured.
Though debt consolidation loans sound like a great idea, the success in staying out of debt lies in not going back to using the credit cards like before. People often use their home equity to take a debt consolidation loan and then forget to make payments. Sometimes, they borrow more than needed for their debt consolidation, and later find themselves in more debt than they started off with. Debt consolidation loans help to reduce and eliminate debt only when the individual is willing to show financial discipline.
Debt consolidation loans can come at variable or fixed interest rates. A variable interest rate loan is good if interest rates are expected to head lower. But it could become bothersome if they start pushing up. Since the individual is not in a position to take any more risks, the best bet would be to lock in an attractive fixed interest rate.
Unsecured Debt Consolidation - Pros & Cons
While federal consolidation student loans are backed by official support no such support exists in case of the private student loan consolidation process. In case of such federal loans the Government takes the responsibility of repayment to the lender when the student is unable to pay for reasons beyond his or her control. Of course the Government will get the amounts repaid by the student but only when they are in a position to do so.
Lenders are also more at peace with the federal loan consolidation process since they are assured of the repayments. Ordinarily the banks are such lenders and they are assured about getting back the money they have invested. That is why the federal loan rates are normally lower than the private loan rates.
Private loan consolidation involves higher risks
As already stated the federal loan consolidation is one of the safest processes for both the lender and the borrowers. Since the lenders are assured of the repayment with the federal authorities being the guarantor they feel quite happy to grant lower rates of interests in such cases.
Private student loan consolidation is a process that involves much higher risks for the lender. There is no such official guarantor who will ensure repayment in case of failure by the borrower. True the lender could always resort to the legal proceedings against the defaulters. But the process will involve additional expenses over and above the money lost on account of default and the long hassles of fighting legal battles are often the headache that no lender will cherish.
When student loan consolidation may not be permissible
There are certain cases where the student loan consolidation may not be permissible. For example you may not be permitted to have the student loan consolidation with your spouse. You may not also be able to get the best student loan interest rates unless you opt for the student loan consolidation refinance
If you have already consolidated your student loans in the past with some private consolidator other than the US Department of Education it may not be permissible for you to have your loan consolidated all over again.
There are some relaxations in this regard though. If you have acquired some new loans in the meantime then such consolidation will be allowed. Student loan consolidation may also be permitted when you have multiple consolidations from various lenders.
Student loan consolidation repayment
Once you consolidate student loans, the first repayment shall be due within 30 days of such consolidation. However the type of repayment you will make depends on your choice. You can opt for the standard payments where the monthly premiums are fixed or graduated payments where they increase over the years.
Conversely you can opt for the income sensitive payments based upon your current annual income and changes in it. Finally, you can opt for the extended payment for amount exceeding $30,000 and $50,000. Such extended period shall be 25 and 30 years respectively. Good news for you is that most of the consolidators do not ask for fees, credit check and they do not penalize you for early repayment permitting you the best student loan consolidation [http://www.badcreditokay.net].