What is the difference between a personal loan and a debt consolidation loan? When applying for a loan are you better off disclosing that you will be using it for debt consolidation? or not? Do they base your loan worthiness on your reason for the loan or your credit score? I want a fixed apr loan to consolidate all my credit payments any ideas where I can find a reasonable one?
2007-03-04 15:01:38 · 6 answers · asked by lillola 1 in Business & Finance ➔ Credit
I DO NOT want to file bankruptcy!!!!!
2007-03-04 15:09:45 · update #1
A personal loan is just a loan that isn't secured with a house as collateral like a mortgage. Since personal loans are riskier for the lender they tend to carry a higher rate.
A consolidation loan is basically a loan where all your credit card debt is paid off by a lender so now instead of owing several credit card companies you now owe one lender. If you are going to be doing debt consolidation the lender has to know that you are going to do that since they (the lender) are the ones that are going to pay off the credit card companies.
The lender cares about what you will do with the money but they mostly care about your score.
There are a lot of companies that offer these type of debt consolidation loans. Try to shop a few lending institutions and a few banks to see which one will offer you the best interest rate. Don't shop around too much. Too many credit inquiries can lower your score.
I don't know where people get their information but bankruptcy is not a better alternative than debt consolidation. Bankruptcy has a horrible effect on your credit. If you do debt consolidation it will lower your score but it will not be as bad as a bankruptcy.
2007-03-04 15:25:53 · answer #1 · answered by acvader 2 · 0⤊ 0⤋
Really they are the same thing if you think about it. When you apply for a personal loan they will generally want to know what you are using it for so I would not lie about it. Because there is nothing that says you won't pay off the cards and charge them up right away the qualification guidelines are about the same. If you could qualify for a personal loan you would qualify for a consolidation loan.
However, no one ever got out of debt by getting more debt, this does not work in the long run. Since you don't want to declare bankruptcy you probably should talk to a Credit Counsling Agency. They will negociate with your creditors and you will make one payment to them and they will distrubute the money. The only thing is that while you are on the program your credit cards are closed and you can not use them anymore.
2007-03-04 15:23:07 · answer #2 · answered by OC1999 7 · 0⤊ 0⤋
A personal loan will look better on your credit report than a debt consolidation loan will. Whatever you do, don't go with one of those "debt-solution" services that you see on TV. They don't tell you, but it looks just as bad as bankruptcy on your report. Loans are based on your credit score. You might have a little room for negotiation if you have a good reason but I doubt it. If you are seriously in debt & can't get a loan you should probably consider bankruptcy. Bankruptcy isn't like it used to be. The stigma isn't there anymore & it's relatively easy & quick to build your credit back up. Hope this helps! Good luck!!
2007-03-04 15:14:03 · answer #3 · answered by lovemy2babies 4 · 0⤊ 0⤋
that depends on your situation if you are really in debt and apply for a personal Loan you might not get it. If you apply for debt consolidation they know where it is going and you are trying to pay off those old bills. Your credit score will play a big part in if you get the loan or not. Try a consolidation place instead of a bank most of the time you get a better rate.
2007-03-04 15:24:40 · answer #4 · answered by notlookingfordates 1 · 0⤊ 0⤋
I have placed this in the source box. There is a wealth of information there and a great free debt management software program. I bookmarked the site as I return to it often for the advice it offers. I hope this helps you.
2007-03-04 18:50:49 · answer #5 · answered by Anonymous · 0⤊ 0⤋
The best thing to do is fill bankruptcy its will lower the amount you will have to pay back.
2007-03-04 15:07:36 · answer #6 · answered by Anonymous · 0⤊ 1⤋