Be Careful with Your Personal Loan Debt
Much like credit cards, personal loans are handed out to almost anyone, regardless of past
credit history. If you are willing to accept a high interest rate, high fees, and even higher
monthly payments, then odds are, you can find a lender that is willing to give you a
personal loan. Yes, in some instances, you may have no other option but to take a
personal loan, if your car breaks down, your home needs repair, etc. Taken out for the
right reasons, and carefully maintained, these personal loans are okay. People can get into
financial trouble, however, by taking out personal loans just for the extra money, or to
purchase frivolous items, and then find that they canít make the monthly payments
required. People forget that when they borrow money from a lender, they will at some
point, be required to pay that money back and applicable fees as well.
Many people take out personal loans and then use the money to payoff their credit card
debt, and this is okay, if done in the right way. If you can get rid of some monthly
payments, and save money, then yes, a personal loan of this nature might be a good idea.
People who lack the discipline to keep them from going further into debt with more credit
cards and loans, however, shouldnít even consider going this route, as they will often
worsen an already bad financial situation. They use their personal loan money to pay off
their credit card debt, and leave the accounts open. They see something they want, and
rather than try to save the money up to get it with, they whip out that open credit card
account, and before you know it, they have maxed them all out again, and now have to
pay not only those minimum monthly payments, but their personal loan payment as well.
It doesnít take them long to rack up more monthly payments than they could ever hope to
pay, and that is where the trouble starts.
At this point, if you are smart enough to realize and admit that you need help, you should
really seek out the help of a debt management company, someone who focuses not only
on helping you payoff your current debt, but teaching you how to better manage your
money, so that you donít end right back up in the same situation. These companies are
able to work with your creditors, often cutting monthly payment amounts, stopping fees,
and reducing interest rates, so that more of what you pay goes toward your balance, and
you get out of debt sooner. If your personal loan debt is unsecured, these companies can
help you with it as well, although they specialize in credit card debt mostly.
You want to take your time, and do your homework, before selecting a debt management
company to handle your accounts. Some of these companies donít really help you at all,
so you need to look around. Your creditors may also be able to recommend a company
that they routinely work with, which might make it easier for you than browsing through
all of the ones found online. You will need to get all of your paperwork together, showing
monthly income and monthly debt, as well as all of the balances you own, their interest
rates, and normal monthly payments.
You will go over everything with a counselor, either in person, by phone, or online via
email, whichever you prefer. Once you come to agreement on how much you could pay
your creditors per month, the counselor will draw up proposals and send them to your
creditors, including of course, your personal loan lender. You will be notified by both
your debt management counselor, and your creditors, of when the proposals have been
accepted, or if not, the reasons why. Your counselor will then instruct you as to your
monthly payment amount and the date it is due, and as long as you make that payment
every month, and refrain from spending any extra money, you will be able to get yourself
out of debt, and avoid collections calls and hassles from your creditors, as well as save
money on fees and interest.
In most cases, your lenders will be more than happy to work with you in this manner, but
you may get one or two that try to make things difficult for you. Most of them realize that
they win as well, by cooperating with the debt management rules, as you will be paying
them back the money you owe them, and they wonít have to waste, labor, or money in
convincing you to pay. You will need to keep in touch with your counselor, and if your
situation changes or you are unable to make your payments, let them know so that
something else can be arranged. Once you miss two payments, you will lose your
program, all fees and interest will again be charged, and your lenders will start calling
Getting a personal loan is not that difficult, but in some instances, paying it back can be a
nightmare. Be careful what you get yourself into!