Secured debt consolidation loans
December 23, 2009
At a time like now, credit is particularly difficult for a lot of people to access. However, some people may find it easier to get a loan if they can use some of the equity in their property as ‘security’.
If you’re a homeowner, and you are looking to take out a debt consolidation loan, you may want to consider securing it against your property – but why?
• Secured debt consolidation loans can often come with a lower interest rate than the rate you may be able to get on a typical unsecured debt consolidation loan. This is because creditors are taking less of a risk with their money when you opt to secure the loan against a valuable asset, such as your home.
• Sometimes, you can arrange to make your secured loan repayments over a longer timeframe than you would be able to with an unsecured debt consolidation loan. However, please bear in mind that if you do arrange to repay your loan more slowly, you will stay in debt for longer – which means you will pay interest on your debt for longer too.
• When providing you with a secured debt consolidation loan, lenders are taking fewer risks with their money. Because of this, they may offer more than they would through an unsecured loan. The amount they do offer will depend on the level of equity you have in your property and on your ability to keep up with repayments, among other things.
Are there any risks involved?
If you are unable to keep up with repayments on your secured debt consolidation loan, your home may be repossessed. Although repossession should be a lender’s last resort, you should still think very carefully before securing any debt against your home.
If you are thinking of taking out a debt consolidation loan, regardless of its type, you should speak to a professional debt adviser before doing so. They will be able to help you work out whether you could afford the repayments, or if you would be better off looking into an alternative debt solution.