One option that many people have for getting access to credit is seeking a secured personal loan. Unfortunately, secured personal loans are more a method for repairing your credit over time than an actual way to increase your currently available credit.
An unsecured personal loan is when you are lent a sum of money without having to have any collateral in exchange. In comparison, a secured personal loan works like this:
You have a sum of money (in the past, objects like jewelry, gold bars, and even valuable guitars could be used. However, today these types of loans will require cash if you go through a national bank. You may explore other options with your local credit union or lender) that you wish to use as collateral for a secured loan.
You open a new savings account with the bank that is issuing the loan.
You deposit the money in the savings account.
The savings account is used as collateral for your personal loan on a dollar to dollar basis.
For example, if you have $5,000 saved up, the largest loan you could receive at most banks is $5,000. There are some banks that will loan you a certain percentage over your collateral amount, but these banks are quite rare and their policies are ever-changing.
You will have to pay interest and make monthly payments on your new secured personal loan. Additionally, you likely will not be able to access your savings account until you have paid off your personal loan in its entirety. Secured personal loan rates will vary between lenders, and depending on the amount you are borrowing and the collateral you put up, so it pays to shop around online.
So with all of this, why would anybody seek a secured personal loan?
There really is one large reason: these loans are amazing ways to repair your credit. You can have the worst credit rating in the world, and as long as you have the deposit, you have access to a very sizable loan. You are able to get a secured personal loan with bad credit, as the asset you use for collateral reduces the risk to the lender. Your bank will report this loan to the credit reporting agencies as if they gave it to you outright without a security deposit on your part. As long as you pay off your secured personal loan, this goes a very long way to showing other lenders and creditors that you are credit worthy. This is so effective, in fact, that many people who use a secured personal loan see their credit rating go up by hundreds of points over the course of the loan. Additionally, you are subject to very little liability beyond your initial security deposit.
A secured personal loan is an amazing credit repair tool. You can get started with as little as $3,000 saved up with most banks. Some banks even specialize in issuing these loans for as little as $500. One use for a personal secured loan is finance for the purchase of a valuable asset like a new car. Often the item purchased will become the security for the loan.
Posted in Personal Loans.
Tagged with personal secured loan finance, secure personal loan, secured personal loan, secured personal loan bad credit, secured personal loan rates, secured personal loans, unsecured personal loan.
By Henry
– August 22, 2009
Debt consolidation can be a great option for people who are carrying debt with certain characteristics. Here are some commonly asked debt consolidation questions that many people have and some answers.
Will my monthly payment be lower after a debt consolidation loan?
Likely yes, though this will depend on the rate you receive on your consolidation loan. The primary benefits of receiving a debt consolidation loan however are that you only have to deal with one finance company if you have a number of loans and that you free up your credit cards for emergency situations. However, the vast majority of people find that their monthly payment is much lower after receiving one of these loans. Additionally, you reduce your exposure to multiple instances of late charges since you will only have one loan.
Am I a good candidate for a debt consolidation loan?
You will have to take this up with an expert who can analyse your specific case. However, the best candidates for debt consolidation loans typically have three or more credit cards that are nearly maxed out. A debt consolidation loan will allow you to zero out your credit cards and make payments to only one finance company every month. You will also be able to keep your credit card accounts for emergencies.
What will happen to my credit rating?
As with anything else, a debt consolidation loan is a loan that you have to pay back. What happens to your credit rating is largely contingent on how you pay your loan back in the future. Many people see a slight bump right away as they pay their credit cards off, especially if they had a lot of balances that were nearly maxed out. In the long run, debt consolidation loans are great credit repair tools because of how useful they are from a debt management perspective.
Are there any risks in receiving a debt consolidation loan?
The truth about debt consolidation is that it really can help you get back on top of your finances. Most people who receive this loan see a wonderfully positive outcome over time. However, the most common pitfall involves people falling back into unmanageable debt after receiving a consolidation loan. Because of how the loan works, you zero out your credit cards and make your payments only to one creditor every month. This means that your credit cards are still open and usable. Some people with poor financial discipline begin recklessly using their credit cards, and find themselves in close to double the debt they started out with. Rest assured that this is a very rare situation.
To learn more about debt consolidation loans and how you could benefit, talk to your bank or loan broker or consider the online loan brokers.
Posted in Debt consolidation.
Tagged with about debt consolidation, about debt consolidation loans, debt consolidation faq, debt consolidation help, debt consolidation questions, truth about debt consolidation.
By Henry
– August 22, 2009
