Consolidate debt

Debt consolidation loans have become a popular way to repay unsecured debt. The reason most people use a consolidation loan is because they have multiple debts, they’re looking for a lower interest rate and they want to reduce their monthly payments. However, there are several risks involved with debt consolidation that need to be examined before taking out a consolidating loan.

A debt consolidation loan is simply combining all unsecured debts into one loan by either taking out a secured or unsecured loan. A secured loan means there is some asset or form of collateral backing the loan which can be liquidated if the borrower stops making payments. The most typical form of collateral used for a secured loan is a home. An unsecured loan is a loan that is only backed by the consumer’s signature and not by collateral. Interest rates for unsecured loans are usually higher because the risk is higher for the lender.

There are several loans available to consolidate debt such as:
Home Equity Loans Secured Loans Unsecured Loans
Consolidating Debt with Home Equity Loans

Home equity loans can be used to consolidate debt. The benefit of a home equity loan is a much lower interest rate than an unsecured debt, such as a credit card. Yet because the term length is longer for a secured loan, the borrower ends up paying more than the original principle of the debt. The home owner also jeopardizes the security of their home by increasing their monthly payments because if they are unable to make the higher payment, the lender can foreclose on their home.

Consolidating Debt with Unsecured Loans

Unsecured loans are also used to consolidate debts. Typically, unsecured loans have a fixed interest rate that is somewhat lower than the interest rates of the other unsecured debts. The two primary advantages are a lower interest rate and the convenience of only one payment. However, most lenders offer a short-term low interest rate that can eventually balloon to more than 20 percent. Lenders may also require high credit scores and other strict qualifications for unsecured loans since the only way to recover the borrowed amount, should the borrower default on the loan, is to take legal action.

Any consumer contemplating a debt consolidation loan should first consider the risks involved. A viable alternative to debt consolidation is debt settlement. Having a professional negotiate and reduce your overall debt can save you money and prevent needlessly risking your home to pay of debt.

By: Scott Sumerford

The average person juggles numerous bills each month–credit cards, auto loans, personal loans and more! If you’re getting buried beneath paperwork, you may want to consider a debt consolidation loan. Instead of dealing with multiple creditors, you’ll only have to pay one bill each month. And you can get a debt consolidation loan–even if your credit is not-so-perfect–if you secure it with some type of collateral. Here’s how to get approved:

1. Decide on your collateral

Whatever item you choose as collateral for your loan should be one you’re willing to risk, since the lender could take it if you can’t make your monthly payments. One of the least expensive options would be your home, since you could get a home equity loan, a home equity line of credit or a second mortgage. If you’re not willing to risk your house, you could also use an automobile or a boat. Some lenders will accept stocks or bonds, or even expensive belongings such as jewelry or electronics.

2. Find a lender

You’ll need to find a lender that accepts the type of collateral you’re using to secure your loan. Most major lenders and banks offer home equity loans, and many offer personal loans secured with a vehicle or boat. You may have to dig a little deeper to find a lender that will accept jewelry or other belongings as collateral. Check with your local banks and credit unions, and do a search online to find an appropriate lender.

3. Compare loan rates and terms

Before you sign up with any lender, make sure you compare their rates and terms with similar loans. Some unscrupulous predatory lenders may try to take advantage of your situation by charging you a high interest rate or extra fees. It’s always best to compare at least two loans to ensure that you’re getting the best possible rate.

Try using one of ABC Loan Guide’s Recommended Lenders For A Secured Debt Consolidation Loan.

Secured Debt Consolidation Loans are possible even for those with less-than-perfect credit. By using an expensive item you already own–house, car, boat, jewelry–as collateral, you become less risky as a borrower, making it more likely that you’ll get approved for a loan.

By: Carrie Reeder

If you have a lot of debt, you may be wasting your money. Many times, when our debt is mostly in credit cards, we are paying an enormous interest rate. This can make your payments higher and means that you will pay far more than you ever borrowed over the long run.

If much of your debt is in high interest credit cards, you might want to consider consolidating. What this means is taking out one loan that is large enough to pay off all your other debts. Then you pay off the high interest credit cards and make one payment each month. You can typically get a loan with a much lower interest rate than that of your credit cards, so your payment is lower than the total payments you were making. Plus, you will be able to pay the debt off more quickly.

Consolidating debt is fairly easy if you own your home. You can often get a home equity loan at a very low interest rate. Home equity loans allow you to borrow in the equity you have in your home, which is the difference between what you owe on your mortgage, and what your home is currently worth. However, if you sell your home before the home equity loan is paid off, you will have to use proceeds from the sale to pay the loan off, just as with your primary mortgage, because this loan is also secured by your home.

If you’re not a homeowner or don’t have enough equity in your home to borrow against, there are companies that offer debt consolidation services. These services are designed for people who are having trouble making their monthly payments. These services can be very helpful to those who are drowning in debt, because they can help them have a monthly payment that they can afford. However, this service comes with a price. Debt consolidation services get you a lower monthly payment by contacting your credit card companies and having your payments or interest rate reduced. This is helpful, but the fact that you’ve gone this route will be reported on your credit report and may keep you from being able to get more credit for several years.

By: Dee Marie