The symptoms of DOS (Debt Overload Syndrome) are easy to diagnose. You might be suffering from night sweats, headaches, an upset stomach, insomnia, muscle tension or high blood pressure. These physical problems are caused when the stress related to being in debt causes your body to release high levels of the chemicals associated with your “fight or flight” response. Fortunately, there are ways to fight Debt Overload Syndrome and here are some of the most popular.
- Get a debt consolidation loan
- Take on a second job
- Borrow from your retirement fund
- Negotiate with your creditors
- Snowball your debts
- Do a credit card balance transfer
A debt consolidation loan
Of all these options, one of the fastest ways to get relief from DOS is to get a loan and pay off your existing debts. The two types available are secured and unsecured loans.
A secured loan is one where you “pledge” or provide an asset as collateral. For most families, that asset will be their homes in the form of a refi, a home equity loan, a second mortgage or a homeowner equity line of credit.
How these are the same and how they’re different
These four types of loans are the same in that they all require you use to your home as collateral and you must have enough equity to qualify for the loan. Here’s how they’re different. A refi is called refinancing your mortgage but really means getting a new mortgage. As an example of how this works, if you had a home worth $200,000 but your mortgage was down to $150,000 you could get a new mortgage at $200,000 and take most of the difference (your equity) in cash and pay off your other debts.
With a homeowner equity line of credit, you borrow against your equity and are given either a plastic card (much like a credit card) or a checkbook that you use to access the money you’ve borrowed whenever you wish. If you choose a home equity loan, you’re also borrowing against the equity in your home but get all the money at once. This is why many homeowners who want to pay off their debts choose it instead of a home equity line of credit. Finally, there is a second mortgage, which is just what the name implies – a second mortgage on your home on top of your existing mortgage.
Why an unsecured loan could be better
There are two major reasons why many people choose to get an unsecured loan. First, they may not own a home or have enough equity to borrow what they would need to pay off their other debts. The second is because with an unsecured loan, they would not be risking their homes as they would with any loan where they had to use their homes as collateral.
Where to get an unsecured loan
If you believe an unsecured loan would be your best option for treating DOS a good place to start would be your bank. If you have a good relationship with your bank and a decent credit score, it might be willing to loan you the money. Unfortunately, you may have to do some “selling” as many banks aren’t very interested in making unsecured personal loans due to today’s low-interest rates, plus the paperwork required. If you belong to or could join a credit union, this might be a better option. Credit Unions are owned by their members instead of shareholders so they often have more flexibility in making loans than banks.
Here’s a short video with suggestions for other ways to get an unsecured loan.
The Internet has changed our lives in many different ways. Many of us now work at home thanks to the Internet, do our shopping online, access our bank accounts, communicate with friends, and buy and sell stocks. One very recent change is that we can now get unsecured personal loans from online lenders without ever stepping into either a bank or credit union. There is also a new class of loan providers called peer-to-peer lenders. This is where you borrow money from another person or group of people with no third party financial institution involved. You could go on the Internet, fill out a couple of online forms and find out in literally just a few minutes whether or not you would qualify for a loan. And if you did qualify, you would probably get the money within a day or two. Three of the most popular of these peer-to-peer lenders are Prosper and Lending Club.
How much could you borrow?
All three of these peer-to-peer lenders will loan up to $35,000 or much less than you could probably get with some type of secured loan. The interest you would be charged will be anywhere from 6.73% on up – depending on your credit history. To put this another way, your interest rate will depend on the degree of risk you represent. If potential lenders see you as being low risk, you would probably qualify for the lowest or one of the lowest interest rates.
Here are some tips that could help you get a peer-to-peer loan and at a good interest rate.
- Tell the truth
- Describe your situation as much as possible
- Be sure to check your grammar and punctuation
- Have realistic expectations
- Think like a lender – the more you can convince the potential lender that you’re a good risk the better
- Don’t act desperate
- Respect the contract
Watch out for scam artists
While the Internet has brought us many good things it has also brought us some very bad things in the form of scam artists. If the idea of getting an unsecured peer-to-peer personal loan interests you, make sure you check out the company very carefully before signing up for a loan. The best way to do this is probably to go online and look for reviews. For example, if you type into Google the term “reviews of the lending club,” you would get at least eight pages of results – or pages related to reviews of this peer-to-peer lender. You might also check with the Better Business Bureau to see if it has accredited the company