Types of Debt Consolidation Loans

Debt Consolidation --> --> Home Articles About Us FAQ’s Types of Debt Consolidation Loans A debt consolidation loan is best described as a way of systematically assimilating your debt so that you can manage it more effectively. This kind of loan will help you avoid the consequences of uncontrolled spending and runaway interest. It may seem thoughtless to borrow more money to pay off your current debts, but many have found that a debt consolidation loan has benefits that far outweigh those of paying off several accounts at a time. Applying for a debt consolidation loan is fairly easy. Many lending establishments, like banks and companies, offer consolidation loans based on a few basic requirements. The next step is deciding which loan is right for you. Unsecured Loans An unsecured loan is one of the two main types of debt consolidation loans. This loan does not require you to provide any form of collateral. Basically, you will be given the loan without providing security in the form of an asset, like your property. The main draw card with an unsecured loan is that you will not have your assets repossessed if you are unable to repay your loan. The primary disadvantage of an unsecured loan is that you will be required to pay a considerably higher interest rate in comparison to a secured loan. This is because the risk is higher for the lender when no collateral is provided. Who Should Apply For an Unsecured Loan? If you don’t have any major assets or you have a bad credit score, then this may be the only loan on offer to you. Even so, you will still need to work out if it is a worthwhile option. It is important that you check whether the management fee and interest on an unsecured loan is in fact less than what you already pay on your current debts. Most major banking institutions do not offer unsecured loans. As a rule, it is vital that you investigate the credibility of any lending company or institution that provides unsecured loans. Secured Loans A secured loan requires that you provide collateral against money borrowed. Your assets, being your car or your house, are offered as collateral so that if you fail to make repayments the lender can repossess them for immediate repayment. The risk is considerably lower for the lender when viewed in relation to an unsecured loan. As a result, you will qualify for a higher loan and the interest rate will be lower. The only disadvantage in opting for a secured loan is that you risk losing your assets if you default on payments. Who Should Apply For a Secured Loan? The option of a secured loan is available to you if you have assets that you can offer a lending institution as security. The value of your assets will determine the amount of money on loan to you and the interest rate you are offered. Both the loan and the interest rate will be considerably better than an unsecured loan. Many South-African’s choose to take a second bond on their home when consolidating their debt. This common approach may put your property at risk, but the comparatively lower interest rate that it tends to offer makes it an attractive option. It is important that you realize the consequences of applying for a secured loan. It takes a certain level of responsibility on your part to make sure that you don’t default on your payments. If you do default on your payments, you risk having your assets repossessed. Summary The two main types of debt consolidation loans on offer are secured and unsecured loans. They both offer a way of managing insurmountable debt. Your individual requirements and circumstances will ultimately determine which type of loan is best suited to you. Click Here to Apply for a Debt Consolidation Loan Leave a Reply You must be logged in to post a comment. Copyright © 2009 Debt Consolidation | RSS Feed | SiteMap Theme adapted for The Internet Marketing Upstart Program