Everybody who is or has been in debt has considered debt consolidation loans as an option. However, few can get approved for secured consolidation loans because not everybody has enough equity left on their homes. And though unsecured consolidation loans exist, they are not easy to get. And often, this question rises: Will I be able to get an Unsecured Consolidation Loan?

Lack of collateral turns unsecured debt consolidation loans a very hard to qualify financial product. There are many issues to be considered before applying for such loans because a decline can affect your credit negatively. The issues regarding loan requirements, risk involved, loan amount and type of debt are mainly the most important ones.

The Risk Involved

On unsecured loans, the lender runs a greater risk because the legal means to recover his money if the borrower defaults on the loan are complex and costly as opposed to secured loans. This has consequences on this kind of loans and implies that the requirements for approval are harsh and the loan terms are worst than those of secured loans.

The concept of risk defines most of loans characteristics and is the variable that will determine every aspect of any financial product. All other variables reach equilibrium to keep risk to a minimum or to compensate it with proper profits. Thus, the risk you represent to the lender will determine whether you will get approved for an unsecured consolidation loan or not and on what terms.

Requirements For Approval

Someone applying for any kind of loan needs to show proof of a steady income that will let him afford the loan’s monthly payments. This implies a steady job for at least two years and a regular income proved by showing copies of pay checks or other documentation like tax payment receipts, etc.

When it comes to unsecured consolidation loans, there is no exception to this particular requirement. Moreover, the applicant may need to meet harsher requirements than with regular loans. This is due to the fact that the lender needs to make sure that the applicant will be able to afford the monthly payments because despite the borrower’s commitment, he can get into more debt by simply using credit cards or obtaining other lines of credit.

As regards to credit requirements, you may think that it does not make sense to ask for a good credit score to someone who wants to consolidate debt. However, due to the unsecured nature of these loans, there is already too much risk involved for the lender and thus, someone with a past bankruptcy, defaults or too many missed or late payments may not get approved for an unsecured consolidation loan.

Loan Amount And Debt

Also, unsecured loans never come with high amounts. Thus, if you have too much debt, you will not be able to consolidate all of it with an unsecured consolidation loan because you simply will not be able to obtain that kind of money through an unsecured debt consolidation loan.

Moreover, if you have low interest debt like subsidized loans, student loans, mortgage loans, etc. you will not be able to consolidate it either because the interest rate charged for unsecured debt consolidation loans is way too higher than the rates charged for these loans which would turn consolidation into a useless procedure.

By: Melissa Kellett

Direct Loan is true to its name and self explanatory. It is a program in which the government loans money directly to students rather than using a third party bank or other lending institution to process and make the loan. The direct loan program has been in affect for about 15 years now.

The opposite of a direct loan is a Federal Family Education Loan (FEEL). Both direct loan programs and FEEL programs make PLUS and Stafford loans available. There are other similarities between what each program offers. The borrower has to decide which type of program he wants.

Since both offer the same types of loans the same requirements must be met. If it a loan offered based on a person’s credit scores then both direct and FEEL programs will have the same requirements. The same is true if the loan is based on a family’s income. Both programs will have to follow the same requirement guidelines in offering the loan. With so many similarities how does one choose?

Well there are some differences to consider. One is in customer service. When you involve a third party that is in business to make money normally you get more of a personal touch. Also, because the lender will make no money if they are not able to extend you credit they will work harder to get you approved for the loan. Government agencies are normally not as personal or as accommodating.

Go to talk.collegeconfidential.com/forumdisplay.php?f=7 if you want to hear what others think about the two different programs.

Many things posted are solely personal opinion and not so much on the actual variables or requirements of each program. Reading through it may help you get a good idea of where you stand between the two options.

One important factor to keep in mind is that whenever you are dealing with a private lender your loan is subject to be sold to another lending institution.

The opposite is the case with direct loans which are always directly with the federal government. It if is important to you that throughout the life of your loan you are able to deal with the same person or group of people if you have questions or concerns you might want to consider going with a direct loan program.

By: W. M. Blake