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There are times in life when the accumulation of debt can become overwhelming. Many people find that obtaining credit is often much easier than paying it back. Struggling with an overload of debt not only crushes the spirit, it can be devastating for the future. While managing a ton of debt may seem insurmountable, there are solutions.

Debt consolidation loans offer a ray of hope for those who find debt management to be an increasing difficulty. Consolidation loans work on a simple premise; combine a debtor’s high interest personal debt into one low rate loan.

Notable benefits of a debt consolidation loan include:

• One monthly payment rather than several creates a huge reduction in fees and interest charges commonly associated with falling behind on numerous bills.
• Consolidating debt allows for more financial freedom. Having one lower payment a month may help debtors afford to put more money towards paying off the mortgage or start a savings plan.
• Debt consolidation may improve lagging credit scores by lowering the number of accounts a debtor holds and by showing the rolled over debt as having been paid as required.

For many individuals, a debt consolidation loan is an efficient weapon in the battle of the bills. For others, however; consolidation of debt may prove detrimental in more ways than one.

• For poor financial planners, debt consolidation may give the misconception of freeing up money and credit for the purpose of obtaining more debt. An example of this would be as follows:
  • Sarah has four credit cards, a car loan, and many regular bills such as a house payment, electricity, trash, etc.
  • Sarah finds that with all the money she pays out, there is little left over to enjoy life.
  • To remedy this, Sarah consolidates all her debt into one low payment loan.
  • This frees up a substantial amount of money for Sarah and looks great on her credit score.
  • Now with a seemingly fresh start and a renewed vigor, Sarah rushes head long to the mall to buy that diamond tennis bracelet she’s been dying to have.
  • The problem; the bracelet goes on her newly re-filled credit card and gives her another monthly payment.

Those with poor spending habits rarely learn to manage debt more accurately through debt consolidation.

• Debt consolidation may reduce stress by lowering payments, but has the added inconvenience of extending the debt to longer terms. In theory, this would be ideally rectified with the debtor paying any excess income towards the goal, thus eliminating the debt quickly. Unfortunately, most people do not do this and instead acquire more debt thinking they have enough money to afford them now.

When discussing debt consolidation loans, it is important to note that there are two types. Secured and unsecured.

Secured loans are obtained through the process of using collateral. This means that items such as owned vehicles, homes, or other assets will be attached to the loan and upon failure to repay, the items become the property of the lender. If the debt consolidation loan is paid as agreed, all collateral is then released by the lender.

Unsecured debt consolidation loans are more difficult to acquire. These are often given to consumers who have a high credit analysis and good employment. An unsecured loan is more desirable in the event that financial hardships may increase as it reduces the amount of damage that may be suffered by the borrower if obligations are not met.

When seeking a debt consolidation loan, always do your research. There are many reputable companies who offer these services, but many others impose unfair interest rates and use improper lending practices. Before deciding on debt consolidation, be sure to consider all other methods of debt reduction.

Whether it’s unexpected car repairs or a financial shortage, life can come at you fast. During times of difficulty individuals may desire an unsecured personal loan. These loans are designed to help borrowers overcome many of life’s fiscal adversities by giving money to those who qualify.

What are they and what do they do?

Unsecured personal loans give consumers the freedom to borrow money without the use of collateral. More traditional loans often come with the stipulation of assigning ownership of certain assets to the lender until loan terms are completely fulfilled. With unsecured loans, lenders retain all possession of valuable property.

Although unsecured personal loans may be used for many situations, they are most often suggested to individuals desiring debt consolidation. The intent of the loan is for the borrower to pay off all other debts with the monies granted to them by one lender. These types of loans are favorable to many lenders as they profit through interest and lengthened term times.

How to Get an Unsecured Personal Loan

Acquiring an unsecured personal loan is sometimes difficult. To qualify, most applicants must have an excellent credit history and a steady income to repay the debt. In most cases, a credit score of 700 or above constitutes a better chance of qualifying for an unsecured loan, but does not guarantee acceptance. It is possible to get one of these loans with a lower score, but interest rates are often much higher.

The process of for an unsecured personal loan is fairly simple and it similar to many other loan requests. Individuals may apply online to several reputable banks or in person at local branches. Most banks require you to:

• Fill out an online or paper application.
• Provide verification of at least one full month of income such as pay stubs, a letter from your employer, or most recent tax return.
• Provide a copy of your most recent bank statements.
• Present proper identification

Then what?

Once the bank receives your request, a loan officer will inspect documentation, analyze your credit score, and evaluate the risk associated with giving you an unsecured loan.

If for any reason the bank feels you may not repay the debt or finds your debt to income ratio is insufficient, a prompt denial is usually issued. In this case, there are alternate lenders that may assume your debt. These lenders often specialize in high risk, low income lending but put borrowers at risk with higher interest rates and predatory lending practices.

If your application is approved, a list of obligations will need to be presented to the bank for pay-off. The bank will then disburse the agreed upon funds to each creditor in order to satisfy the debt. Upon finalization, paid lenders should note your accounts as paid-in-full and notify credit bureaus of your discharge.

After approval and a set amount of time; usually 30 days after the loan is made, you will then be expected to assume repayment of the newly established unsecured loan. If you default on the loan by not making regularly scheduled payments, the lender is forced to initiate procedures to enforce your obligations. Common debt recovery practices include, but are not limited to:

• Wage garnishment
• Mortgage liens
• Negative reports to credit bureaus

As you can see, it is crucial when taking on the responsibility of an unsecured personal loan that you are fully prepared and able to repay the loan as agreed. Consequences for failure to pay back can be devastating for any future plans.

Obtaining financial support from outside sources for the establishment and maintenance of a small business can frequently prove frustrating for new entrepreneurs. A flood of red tape and lengthy applications can cause even the most determined small business owner to want to throw in the towel at getting a small business loan. This doesn’t have to be the case.

There are many ways to get a small business loan. Many of which, unfortunately, do involve filling out mind-numbing and detail oriented requests, but not all of them. Here are a couple of ways that may get small businesses that much needed funding.

MONEY FROM THE SBA

SBA is short for the Small Business Administration. It is a federally run program started in 1953 that offers valuable resources for entrepreneurs wishing to start or increase a small business. The U.S. SBA offers services to the inhabitants of the United States, Guam, the U.S. Virgin Islands, and Puerto Rico.

As this is a governmental program, there are steps which must be taken before, during, and after the application process to ensure the best chances of acquiring a loan. Requirements must be met and specific details as to the nature of the business involved must be disclosed. A basic outline of acquiring a business loan through the SBA is shown below.

1. Create a business plan.

   A business plan is required by the SBA to be included with any application for a loan. Without it, the application will go no further than the front desk. To better the chances of success, submitted business plan should appear professionally done and should always include accurate and up- to -date information regarding the business desiring funding.

2. Go to your local lender.

   Once a business plan is established, it is necessary to take it to a local FDIC bank and consult with an ordinary lender. During an interview with the bank, most loan officers will either fund a business through the bank itself, or direct your application process to the SBA. If passed on to the SBA, the local lender will share important contact information, a credit analysis and the completed application with an SBA agent.

3. When received by the SBA, the loan application and business plan will undergo strict review. At this time, collateral and credit score play a pivotal role in the acquisition of a low interest micro-loan or guaranteed loan. If neither has a high ratio, the loan will be denied. If credit and collateral ratios meet the SBA’s requirements, funding can be approved within a matter of days, but may take as long as 30 days for a response.

   MONEY FROM A PRIVATE LENDER

   Often, a traditional lender or the SBA fails to recognize the value of a new business. Collateral issues and poor credit may also negatively affect the outcome when applying for financial aid through more conventional methods. If this be the case, approaching an already established business owner or investor with your loan proposal may be an option.

   Whether it is a close friend, relative, or individual within the business sector of your community, be sure to use the same manner of advancement used when applying for an SBA loan. Potential investment partners are more apt to fund a project when they know what the business is, what income it will generate, and how long until the money is paid back.

   Here are a few things to bear in mind when approaching a non-traditional lender.

   • Treat the private funder as though they were your bank. Provide them with a professional business plan and a well conceived proposal for why they should give you money.
   • Be prepared to approach many individuals. There are situations when an investor is willing to contribute, but may not have access to the amount of funding you require. In this case, multiple investors may be needed to acquire additional amounts of money.
   • Warm up to the idea of a silent or active partner for your business. Some lenders may stipulate that once they become an investor, they may become a legal partner to the business. This is an uneasy thought for many entrepreneurs as they dislike the idea of anyone else having authority within their business.

   Whether seeking funding through conventional means or through private sources, getting the money needed to maintain or start a new business can be difficult. It is important to remember that in business, rejection is often a part of the process and should never be an obstruction for achieving small business goals.

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