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Top Three Changes to Unsecured Personal Loans Caused by New Credit Card Legislation

[Jun 18, 2009.]


Consumer credit is one of the most rapidly changing areas of American society at this point. New laws and statistics are coming online with almost frightening rapidity. For consumers seeking unsecured personal loans, it may be tough to make heads or tails of what's happening and what it means.

Perhaps the best example of how fast, and how confusingly, the market for unsecured personal loans is changing is the new Credit Card Accountability Responsibility and Disclosure Act of 2009.

Without a doubt, this legislation will change the nature and availability of unsecured consumer credit, otherwise known as loans made with no collateral. Changes may include but not be limited to:

Unsecured Personal Loan Paperwork Nice and Simple

One of the most exciting aspect of the new credit legislation is the demand that loan terms be expressed in "plain language." Unsecured personal loans other than credit cards have actually been speaking relatively clearly for years now, but credit card terms have been notoriously confusing.

Now, as mandated by law, the move towards informing consumers, rather than confusing consumers, is fully underway in all areas of the unsecured personal loan market.

Plan on Paying that Personal Loan Back

Consumers that view the new credit card legislation as an indication that the credit card companies are "on the run" are fooling themselves. In fact, the credit card issuers are making adjustments that guarantee that when they make a loan, it gets paid back. Other unsecured personal loan issuers are doing the same.

And why shouldn't they? Credit card default rates have surpassed 10 percent and bankruptcies are way up, running at 120,000 per month despite much stricter rules than in the past.

Consumers who take out personal loans in this environment should plan--not only hope, but plan--on paying them back on time and in full. Lenders are no longer willing to take a chance on you.

Personal Loans Become More Important When Credit Cards Are Hard to Get

Gone are the days when every mailbox had a few zero interest credit card offers stuffed in it. In fact, as credit card default rates continue to rise and the new legislation forces credit card issuers to work harder for their money, it's likely that some lenders will exit the credit card business entirely.

As that happens, expect other forms of unsecured personal loans to step into void. Fixed rate personal loans may become the new credit card. If that is the way things go, borrowers should address problems with their credit report history quickly, so as to make sure that their creditworthiness is apparent.


About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.

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