Unsecured vs Secured Debt Consolidation Loans
Author: weissheiss
Debt consolidation loans are very much in demand these days but what if your credit history makes you ineligible for a standard consolidation loan? You do have other options for reducing your credit card debt and, with a little online research, you can find a solution that’s right for you.
If you own you home or have other real estate, you may be able to get a “secured” loan. This is most often a home equity loan or line of credit. Depending on the equity in your home, you may even be able to borrow more than you need to pay off your debts but be aware that in doing so, you’ll be perpetuating the kind of spending behavior that got you in dire financial straits. A secured loan used real property that you own as collateral, or a guarantee that you’ll repay the loan. If you default, the lender takes possession of the property.
An unsecured loan, on the other hand, doesn’t require collateral and won’t tie up any of your assets. The interest rates will be higher, making the monthly payments more than with a secured loan, but your property won’t be at risk if you default on the loan.
Borrowing to pay off debt isn’t necessarily the right solution to debt problems. You got into financial trouble in the first place because you were borrowing money, right? There are credit counselors and other companies that may be able to help you. These companies can possibly get your creditors to lower their interest rates, allow you to make smaller payments and even forgive part of your debt. If they do lower your interest rates, more of your payments will be applied to the principal-or original amount borrowed-and your debt will be paid off sooner. It’s not an easy fix by any means, but many consumers find it a very effective way to get a handle on their debt.
Credit counselors and lenders often charge a small monthly fee for their services but there are many programs that don’t. Be sure that you are dealing with a reputable company. With so many consumers in real financial trouble there are many fraudulent credit counseling companies springing up. The Better Business Bureau is a good place to start when you’re checking the reputation of a company that claims it will be able to help you get a handle on your finances.
Debt consolidation can be a great relief and help in dealing with your debts as long as you change the type of spending habits that may have landed you in that situation. Consolidation can free up funds to help pay down other debt or to make the first step in living a life free of credit cards.
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