In the summer of 2019, The Wall Street Journal announced, “personal loans are back.” They didn’t mean it as good news. In fact, the very next line declared, “The American middle class is drowning.” Unsecured personal loans have expanded beyond the traditional bank or finance company disbursement of cash in exchange for your signature and promise to pay over time.
You can apply for an unsecured loan online, through one of many technology-enabled companies that deposit loan proceeds directly to your bank account. In some places, you can apply for a loan to finance your rent. Many people attempting to regain control over debt take out unsecured personal loans to pay off credit card debt.
But, when the problem is anything other than a short-term, unusual situation, it’s unlikely that an unsecured personal loan will offer a real solution. Instead, borrowers often end up worse off.
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Unsecured Personal Loans Add to Your Debt Load
There are different types of unsecured personal loans. In fact, payday loans are just unsecured personal loans with different terms and higher interest rates. Though payday loans are an extreme example, many unsecured personal loans have high interest rates. Some online loan companies offering quick deposit to your checking account have annual percentage rates close to 100%, meaning that the interest charges over a two-year or three-year term may far exceed the amount of the loan.
In most cases, the loan proceeds are gone quickly, and the borrower is left with a new monthly (or even weekly) payment to squeeze into the budget.
Managing Unsecured Personal Loan Debt
The first and most important thing to remember about unsecured personal loan debt is right in the name: it’s unsecured. In other words, there is no property that the lender can take back to cover all or part of the money you owe. That leaves the creditor with limited options for pursuing payment. And, those options are even more limited if you have few assets and relatively low income.
With their options limited, lenders (and later debt collectors and debt buyers) count on being able to intimidate you into paying—even when you can’t spare the money. Clear thinking is your best weapon in this situation.
Like credit card debt, medical debt, and other types of unsecured debt, unsecured personal loan debt is often passed to a collection agency or sold to a debt buyer. Contrary to what the lender wants you to believe, that transfer often increases your options, making it easier to negotiate a settlement. And, debt collectors and debt buyers have to follow legal rules that original creditors don’t.
DebtCleanse™ members get the information and support they need to make good decisions about managing debt and stand by them.
DebtCleanse™ Can HelpWe’ll give you the strategies and resources you need to put debt collector stress behind you.
When you sign up with DebtCleanse™, we’ll team you up with an attorney in your state. Your attorney will notify collectors to direct any future communication to their law offices. This should immediately stop harassing calls and letters.
Your attorney will also interview you and comb through your documents for potential violations of the Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), Telephone Consumer Protection Act (TCPA) or other federal and state laws. Those violations can create leverage to challenge your unsecured personal loan debt and other types of debt. If creditors and debt collectors don’t follow the law, your attorney can hold them accountable.
Often, debt collectors stop collection action as soon as they receive a letter from an attorney, focusing their efforts on people who are less likely to fight back. And, many consumer protection statutes require debt collectors who break the law to pay your attorney’s fees. So, our members may be able to resolve debts without paying anything beyond the membership fees.
DebtCleanse™ can put you back in control with creditors and debt collectors.