Debt Consolidation Loans

Borrow from Your Friends or Family at Your Own Risk

Borrowing from a friend or family can be a legitimate way to get out of debt but beware. If you can borrow the money from someone and are able to pay them back at a later date, we would suggest that as an option, but you should do so at your own risk. This type of borrowing can speed up the time it takes you to get yourself out of debt, but might not appear as easy as it seems. If you are unable to pay your creditors, and then you borrow from someone you know to pay your creditors back, you run the risk of ruining a relationship because you might not be able to pay that person back either. We have heard many horror stories from clients who have borrowed money from friends or family members and then ruined those relationships because they were unable to pay them back. It’s probably better off to keep family/friends and money separated.

There are Alternatives to Borrowing from Your Friends or Family

We offer multiple choices if you don’t want to borrow from your friends or family or you have no one you know to lend you the funds you need. Alternatively, if you are already delinquent with paying your creditor accounts, borrowing from your friends or family to pay off settlements for less than what you owe may also be a better option than borrowing the full amount which you’ll have to repay. If we settle your balances for less, then you won’t have to borrow as much and will have to pay back less in the long run, saving you thousands.

What is a Balance Transfer

A Balance Transfer is when you switch your outstanding credit card balance from one company to another. The new company will pay off the balance of your existing creditor account, and you will now owe money to the new company instead. Many credit card companies will offer you a lower promotional interest rate if you transfer your existing credit card balances to them. This seems like a good idea, and this is an option that many people choose, but we are opposed to balance transfers for several reasons.

Using Balance Transfers to ‘Borrow‘ Your Way Out of Debt

Transferring your balance from one card to another will not get rid of your debt, and it will not reduce the amount that you owe. By transferring your balance, you are simply moving your debt from one card to another, many times leading to a situation where you are putting yourself in a worse predicament than you were in to begin with. Remember, you got into trouble in the first place by borrowing money, so borrowing more money won’t get you out of trouble.

Why Balance Transfers Don’t Help if Your Struggling Financially

Many people receive balance transfer offers that advertise a low interest rate or a 0% rate on any balances that are transferred to the new creditor. The problems is that just because a creditor will advertise a certain rate, it does not mean that you will get that rate, or that you will even qualify to transfer your balance at all.

If you do qualify, that promotional rate will usually increase significantly often after 6 to 12 months, which means in order to take advantage of the promotional interest rate, you have to have your whole balance paid off within that 6 to 12 month period or you will start being charged a higher interest rate again. Moving from credit card to credit card and continually opening new accounts when your promotional rates expire will negatively affect your credit rating as the “average age”.of your accounts will not be old.

Keep in mind that promotional interest rates only last if you pay on time, and chances are, if you are going through financial hardship, this might be hard for you to do. After only one late payment, the company you transferred your balance to will most likely raise your rate, and you’ll be right back where you started.

What is an Unsecured Consolidation Loan?

An Unsecured Consolidation Loan is a loan you can obtain without having to put up any assets as collateral. It is called an unsecured loan because the loan isn’t backed or secured by any assets. If you have good credit and a decent amount of income each month, than an unsecured loan may be a great way to consolidate your debts.

Through our Affiliates, We Offer Access to Unsecured Consolidation Loans

If you do want to look into the possibility of a loan, we belong to a network of lenders so can submit applications to many lenders at once on your behalf. If you qualify, we can arrange for a loan for you to pay off your debts. If you are already behind on your creditor payments, we may be able to arrange for a loan to pay off a lesser amount than you owe so we can settle your delinquent balances for less than what you owe, and still have the accounts zeroed out.

Remember, you most likely got into this financial situation in the first place by borrowing too much money at unfavorable terms. If you plan to get an unsecured loan, the key is to make sure that it is either at a better interest rate than you are currently paying or for a lower amount to settle your debt for less.

How Do You Know if You Qualify for an Unsecured Consolidation Loan?

The downside to an unsecured loan is that you first need to qualify. To be eligible, lenders will look at your debt load and how much money you make each month. If the amount of money you make each month is close to the amount that you owe in bills, then chances are no one will be willing to lend you more money. By combining all of your smaller debts into one larger debt, you can become a larger risk to a single potential creditor. Unless you can put up some assets as collateral, the odds of you being able to borrow enough money to cover such a large balance are probably not that good. The more substantial the combined amount of your debts, the harder it is to obtain an unsecured loan to pay them all off, and the higher the interest rate the loan will have if you do. If you don’t qualify for a low-interest rate, you could end up getting charged up to 24% or higher, which is no advantage to you and becomes just like a regular credit card. For the reasons listed above, we only recommend an unsecured consolidation loan if you can obtain a low-interest rate.

What is a Secured Consolidation Loan?

A Secured Consolidation Loan is when you put up an asset as collateral to get a loan, in which the proceeds of the loan are used to pay off your other debts. The most common type of secured loan is when the asset being used is the equity in a home in what is known as either a second mortgage or a home equity loan. Home equity loans can either be a revolving line of credit or a one time, closed-end loan. Revolving credit lets you choose when and how often to borrow against the equity in your home.

One of the drawbacks of a secured loan is that you are trading unsecured debt for secured debt. If you are struggling, even slightly, we would not recommend this option because if you miss any payments you could lose your home due to a foreclosure. This type of loan will typically take a long time to pay off, but that’s the trade off you will have to make to get a secured loan and a lower tax deductible interest rate if using your home as collateral.

Through our Affiliates, We Offer Access to Secured Consolidation Loans

If you do want to look into the possibility of a loan, we belong to a network of lenders so can submit applications to many lenders at once on your behalf. If you qualify, we can arrange for a loan for you to pay off your debts. If you are already behind on your creditor payments, we may be able to arrange for a loan to pay off a lesser amount than you owe so we can settle your delinquent balances for less than what you owe, and still have the accounts zeroed out.

Remember, you most likely got into this financial situation in the first place by borrowing too much money at unfavorable terms. If you plan to get a secured loan, the key is to make sure that it is either at a better interest rate than you are currently paying or for a lower amount to settle your debt for less.

How Do You Know if You Qualify for a Secured Consolidation Loan?

If you have enough equity in your home, a decent credit score, and enough income, this can be an excellent option for you. You will most likely get a lower interest rate than the one on your current loan(s), and that interest can potentially be deductible, which is a great benefit to you. This type of loan will cause your mortgage payments to increase, but will usually lower your total monthly payments compared to not consolidating and paying each of your other loan(s) individually, in addition to your mortgage.

Lenders look at many factors when determining the qualifications for a secured loan. They look at your credit score, debt-to-income ratio, loan-to-value ratio, the amount of equity in the home, along with a host of other factors. To combine all of your smaller credit card debts into one larger debt by using your house as collateral, it requires you to have equity in your home.

What are Some Other Types of Consolidation Loans?

Other loans that can fall into either the secured or unsecured category are payday loans, some cash advances and business lines of credit as well as tax refund anticipation loans. No physical asset is put up to achieve the loan, but instead the pledge of future cash flow or payments.

Payday Loans & Cash Advances

As an example, usually with a payday loan, you would write a personal check for $115 to borrow $100 for two weeks or until payday. The annual percentage rate in this example is around 390%. If you borrow $5000, you’ll pay back $5750 or $750 of interest for on only a two-week loan. It’s highway robbery! Payday loans are illegal in some states.

Tax Refund Anticipation Loans

Another high-cost way to borrow money is a tax refund anticipation loan. This type of loan gives you an advance on an anticipated tax refund. The APRs in some instances can be over 700%. If you are short of cash, payday and tax refund loans should be your absolute last resort when every single other option would not work for you. Even a cash advance on your credit card may cost less, and we would also never suggest taking a cash advance out either.

Through our Affiliates, We Offer Access to Secured & Unsecured Consolidation Loans

If you do want to look into the possibility of a loan Payday loans, Cash Advances, and Tax Anticipation Loans are among the worst options regarding the interest rate cost to you. We belong to a network of lenders so can submit applications to many lenders at once on your behalf to shop for the best rate as an alternative to a high rate loan. If you qualify, we can arrange for a loan for you to pay off your debts. If you are already behind on your creditor payments, we may be able to arrange for a loan to pay off a lesser amount than you owe so we can settle your delinquent balances for less than what you owe, and still have the accounts zeroed out.

Remember, you most likely got into this financial situation in the first place by borrowing too much money at unfavorable terms. If you plan to get any type of consolidation loan, the key is to make sure that it is either at a better interest rate than you are currently paying or for a lower amount to settle your debt for less.