The effects of financial difficulties can be debilitating but one of the most effective ways of turning the situation around is to get a fresh start loan. The reason is that this type of loan can eliminate a debt in one swoop, but the trick is to get the loan amount that covers the debt fully.

It might seem that a loan applicant in such circumstances is severely restricted by their situation, but with some carefully executed steps, it is possible to get higher loan amounts. After all, every lender simply wants to be assured that they will get their money back, and once that fact is confirmed, the total value is a matter of mathematics.

The steps to be taken are not particularly complicated, and in fact anyone can vastly improve their options. But before beginning the application process for a fresh start loan, it is important to know that the figure looked for is directly dependent on what equity and collateral a person has, as well as their general financial circumstances.

How Much to Apply For

Most people believe that there is a loan amount table that applicants fall into based on a set of criteria, but this is not actually true. Lenders are open to any particular figure. The only thing that matters is that they can be sure it can be repaid. So, fresh start loans can actually be much higher than expected.

That is good news but the realities of any loan agreement is that higher loan amounts come with greater risks. And this is the key point. By offering some guarantee of repayment, perhaps with the use of collateral, the lender can be more effectively convinced to grant the loan.

How Effective is Collateral

In short, collateral can be the difference between a successful loan application and a rejected one. This is especially true in the case of fresh start loans, because the applicant will have previously had financial problems. While most lenders will offer a lenient set of criteria for lower amounts, for higher loan amounts the criteria is much tougher. Having an asset that can be set against the value of the loan helps in increasing the available loan considerably.

For example, a house as collateral can be perfect, especially if the mortgage is already paid. However, even with an existing mortgage, the remaining equity of the property is of value. Some lenders will offer around 85 per cent of equity as the loan amount. Other forms or collateral, however, are jewelry, cars and investments. Of course, failure to repay the loan means the house, car or item of jewelry is lost.

Other Options

Collateral is a very common way to secure a higher loan amount than can be secured against an income. However, it is not the only way. Another is the use a co signer, or person who is willing to guarantee loan repayments by covering the debt should the borrower not be able to pay.

A co signer on applications for fresh start loans is highly effective, not just because of the greater assurance to the lender that repayments will be made on time, but because a co signer obviously has a high level of trust in the borrower. This in itself is very reassuring, especially if the co signer is guaranteeing a high loan amount.

When it comes to any form of loan, the key is to convince the lender that repayments will be made. Whether through collateral, a co signer or even a joint application, this is possible, and with it the opportunity to seek higher fresh start loan amounts that will clear debts and really provide a fresh start.