When the bills are piling up and it becomes difficult to juggle multiple payments to multiple creditors, many people decide to obtain debt consolidation loans. Such loans combine all of your various unsecured debts into one, easier-to-manage loan.
Personal loans often are used as debt consolidation loans, and they do their job quickly nicely if you can get one. Whereas most people have to acquire a secured loan, such as a home equity loan or home equity line of credit to consolidate, personal loans are available to a more selective group.
Personal loans either are unsecured (unattached to valuable property that will be used for payment if you fail to pay), or are secured against something other than your home. They are provided from many different lenders, including banks and credit unions.
In addition to not having to offer up your home as collateral, personal loans generally provide borrowers with a fixed payment and fixed payment schedule. With many lenders, the more money you borrow, the lower the interest.
Because lending money that is unsecured is much riskier for lenders than providing secured loans, especially when the borrowed amount and interest rate are inversely related, there are strict eligibility requirements for personal loans. While the requirements vary from lender to lender, generally one must have excellent credit, the ability to repay, and must be trustworthy.
Your usual bank or credit union is a great place to consider obtaining a personal loan, because a history of responsibility and a relationship with your lender certainly can help you to obtain loan with good terms. Nonetheless, you should compare many different offers before deciding on a personal loan, because the amount that you can receive and the interest rate can vary dramatically.
If you find that you are ineligible to obtain a sufficient personal loan, then you should consider other debt consolidation options, such as credit counseling or debt settlement.
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