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Debt Negotiation Guide:

Stage One
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Prioritise Creditors

Stage Three
Financial Statement

Stage Four
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Loans - Get The Lowdown On What Type
of Loan Could Be Right For You

Other Pages In The 'Loans' Section:

Payday Loans (OK For Bad Credit)
Debt Consolidation Loans
Homeowner Loans (OK For Bad Credit)
Student Loans
Credit Union Loans
Loan Payment Protection Insurance

Borrow Money | Loans | What Are Loans Good For?

This site is primarily intended to help people with debt problems, so there will obviously be a focus on that in this section too, but loans have a wide range of uses, many of which are nothing to do with tackling a debt problem.

This page will give an overview of some of the main types of loan available, and what these can be used for. Whether you need funding for a major home improvement project, or just a quick cash advance to pay for an unexpected bill, you will find something here to help you. You can follow the links to other pages on this site to find out more about the different ways to borrow money, as well as the other options for dealing with debt.

Using Loans To Solve Personal Debt

Loans are often the first thing people think of when they get into debt. Your problems are caused by not having enough money to pay what you owe, so the logical course of action seems to be to borrow some more to sort out the problem. However, loans are not always the best way to solve a debt problem.

Which debt solution is best for you very much depends on the situation you are in. Using one big new loan to pay off all your old debts is known as debt consolidation. Just to confuse things, debt consolidation is also a term used in the US to mean the same as debt management.

Using loans to pay off existing loans can be OK, provided your new loan is at a lower interest rate, but check carefully in case your existing loan has any charges for moving or paying back early. This could easily wipe out any saving you make and increase your debt.

With any loan you need to be careful if you are offered payment protection insurance, as this is where people are most likely to be paying well over the odds. Many people are mis sold loan protection by unscrupulous lenders, and if so you may be able to claim this back.

Borrow Money | Loans | What Are Your Options?

There are many different types of loans and then other ways to solve debt that do not involve borrowing money at all, so it may help to take a look at these various options to help you decide where to go next. The following does not cover all the possible types of loan, but looks at the most common options people use when facing debt problems.

Payday Loans, Or Cash Advance Lending

Main Points:

• Only for small amounts of money, usually up to $1,000 or £750.


• Always very short term - normally less than a month.


• Bad credit report usually not a problem.


• Should only be used for one-off emergencies, not to deal with debt or an ongoing shortage of cash.

Debt Consolidation Loans

Main Points:

• Designed to consolidate a lot of smaller debts into one affordable monthly payment.


• Easier to manage and the monthly payment should be lower than before, but you will probably be paying off the debts over a longer period.


• Can save you money if used properly, but ensure the new loan is at a lower interest rate than the debts you are consolidating.


• Probably not the best solution for larger debts. See below for more suitable alternatives.

Homeowner Or Mortgage Loans

Main Points:

• Only availiable to homeowners


• These loans are legally tied to your home, so if you default on payments your house could be sold to pay off the debt.


• Because your home is used as security, you can usually borrow a large amount of money, and bad credit is less of a problem.


• Can be used to consolidate debts, or for any major expenditure such as home improvements.

Debt Management/Consolidation Plans

Main Points:

• Only normally suitable for dealing with substantial amounts of unsecured debt.


• Not a loan at all, but a re-negotiation of repayment terms with your creditors.


• Usually seen as preferable to a loan as it does not involve taking on any more debt.


• A Debt Management Company sets up this agreement for you, dealing with your creditors on your behalf.


• Interest charges usually frozen or reduced.


• You only have one affordable monthly payment to find.

Debt Settlement/Negotiation (US Only)

Main Points:

• Suitable for very large amounts of debt where you cannot afford the payments of a Debt Management Plan.


• Involves a Debt Settlement Company negotiating with your creditors to agree new repayment terms, usually including writing off a substantial portion of the original debt.


• You just pay an affordable monthly fee, which is used towards paying the settlements agreed.


• Seen as a much better option than bankruptcy when faced with very serious debt.

Individual Voluntary Arrangements Or IVAs (UK Only)

Main Points:

• This is the UK equivalent of Debt Settlement.


• Used for dealing with very serious debt, as an alternative to bankruptcy.


• It is a formal agreement, usually lasting up to five years, which often involves writing off a substantial proportion of your debts.

Loans For Personal Debt - Credit Card Debts

If you have credit card debts that you want to pay off, a loan may not be the best answer. Read the Credit Card pages first. If you choose the right card to transfer your balance to, you should be able to beat the best loan rates. There is the option of transferring your balance regularly to cards offering 0% on balance transfers, but you do need to be on the ball to keep up with this. The alternative is to choose one of the cards offering a low interest rate on balance transfers, which applies until all the debt is all paid off. This is much easier and will be at a lower rate than any debt loan.

If you don't need to borrow much, and you know you can pay it back within a relatively short time (about a year), then you are definitely better off choosing a credit card that offers 0% on purchases for an introductory period. Obviously this is only useful if what you need the money for can be paid for on a card. You will tend to pay more for a short term loan for a small amount, which is another reason to look at cards in this instance.

Loans For Personal Debt - What Is Meant By Unsecured Loans?

Secured (or Mortgage) loans are discussed in detail on the Secured Loans page. Most personal loans that you will come across are unsecured Loans and are generally a safer bet than secured loans. Secured loans are where your home is used as security, so if you fall behind with the loan repayments you can lose your house. If you have the option, an unsecured loan carries a lot less risk, but if you have a poor credit rating, a secured loan is the only way of accessing a substantial amount of money.

Loans For Personal Debt - General Advice When Looking For A Loan

Loans are for a fixed period and most will have little flexibility over the option to repay it early. The longer the repayment period, the more it will cost you in interest, so go for the shortest time you possibly can. When you using a loan for personal debt this is particularly important and can make a big difference.

If you know your credit rating is not good, you could damage it further by applying for cheap loans. These low rates are primarily aimed at people with good credit records, so you are likely to be rejected. Repeated rejections will have an adverse affect on your credit rating and increase the likelihood of you being rejected for credit applications in future.

You can get a Free Credit Report here and find out for yourself if there are any issues with your credit rating.

Apply for the lowest amount you can - the lower the amount, the more likely it is you will be approved.

It may help to draw up a Personal Financial Statement before you apply for any debt loans, to show you what repayment amounts you can actually afford. The last thing you want is to be tied into a loan with repayments you can't afford to keep up.

Another useful option is to look at some of the better comparison sites, such as Cheap.co.uk Loans to be put in touch with a range of suitable lenders.

Recommended US Lenders (see Below For UK)

Prosper Loans

Prosper offer a range of fixed rate unsecured loans to US residents for a whole range of things, from debt consolidation to buying a new car or getting that holiday you always wanted.

Just visit their website and complete the simple application form to see what you could get.

Recommended UK Lenders

Top Recommendation: 123DebtSolutions

One of the largest debt help companies in the UK, 123DebtSolutions offer a wide range of options to help people out of debt. You can either visit their Website or complete the Online Form Below:

Solution Loans (UK Citizens Only)

Lenders who do not credit check you are hard to find, so I thought it was worth listing this one. Solution loans will lend you between £1,000 and £3,000 without a credit check, by using a guarantor system instead. What this means is that your loan has to be guaranteed by another person. Just complete the simple application form on their website to see if they can help.

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