Debt consolidation loans from various financial institutions in Ohio 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 Ohio, 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.
Ohio – Personal Loan to Consolidate Debt
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.
Debt Consolidation Can Either Help or Hurt You
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.