Federal Loan Consolidation: Who Can Qualify and Why
The advantages of federal loan consolidation programs are clear to see, but not everyone can qualify. It comes down to the type of loans are held and the financial strife they are causing.
Often, the response is to take out further loans to cover other areas. But to properly deal with the weight so many federal loans can create, it is necessary to take extremely proactive steps. This is where consolidation can be so effective, buying out the balance on existing loans and replacing them with one simple-to-pay loan debt.
Federal vs Private Consolidation Programs
There are some differences between privately provided and federally provided programs. These largely relate to the interest rates that are charged, with private lenders seeking to make their profits by charging higher rates. The funds provided through federal loan consolidation, however, typically charge much lower rates.
Of course, getting loan approval tends to be much easier with federal programs, as long as the applicant ticks all of the necessary boxes. Qualifying is often quite straightforward with private loans, but approval rests on other matters. When seeking assistance from the federal government, all that is really needed is to prove a need for that assistance.
A crucial factor in any application for such aid, however, is that only federal loans can be covered. Privately secured loans cannot be part of any federally sponsored rescue loan.
Who Qualifies for Consolidation Loans
Qualifying for federal loan consolidation comes down to the type of loans that an individual or business owner is struggling with. Therefore, the first stage in seeking the green light on a consolidation program is having already been issued with federal funding of certain types. There are two categories: agriculture and business.
For farmers and others involved in the agricultural industry, there are four loans that can ensure qualification for a consolidation program, though getting loan approval may depend on the extent of financial hardship. The qualifying loans are FSA issued Farm Loans, Commodity Marketing Loans to bolster production and sales, Ownership Loans to alleviate economic difficulties, and Farm Storage Loans to finance the construction of grain silos and barns.
Businesses have a larger array of federal loans available to them, but there are five types that are covered by a consolidation program. These are any Small Business Loan (as per Section 7 of the Small Business Act), Disaster Loans from the Small Business Association, Indian Loans for Native Americans, Micro Loans for start-ups, and Physical Disaster Loans for businesses that have suffered physical (not just economic) damage in a disaster area.
It is easy to understand that federal loan consolidation exists to help businesses get out of financial hot water, and that it does not exist to provide a road out of debt for anyone. Various federal bodies offer excellent terms to applicants, so it is only those who have suffered real problems that can benefit from these programs - previously getting loan approval is not enough.
The general grounds for federal loan acceptance is that natural or economic disasters have threatened a livelihood, or funds to finance essential facility upgrade work is not available because of a poor credit. These loans can add up, creating real difficulty, but a consolidation program help borrowers back onto their feet.
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ABOUT THE AUTHOR
Donna Hammond is the author of this article. For more information about Bad Credit Unsecured Loans and Mortgage Loans for Bad Credit please visit her website at http://www.quickbadcreditloans.com/