Dealing with debt can be a stressful experience. Sometimes, seeking financial help from debt consolidation loan lender is the best thing to do. Today, let’s discuss how a secured or an unsecured debt consolidation loan can be a solution to your debt problem.
Secured Debt Consolidation Loans
A secured debt consolidation loan requires the submission of collateral to the lender. Usually, borrowers submit their home as security to acquire a much higher loan value. Thus, the borrower can be sure that all his/her existing debts with all creditors will be completely paid off.
As soon as your loan has been approved, you will be subjected under the repayment terms of your debt consolidation company. Thus, instead of dealing with multiple creditors, you can focus on submitting monthly payments to your debt consolidation lender. Also, instead of being charged with different rates of interest for each of your accounts, you will only be charged with a single interest, greatly reducing your total monthly cost.
Despite the risk of repossession, many people prefer to apply for a secured debt consolidation loan rather than a non-secured loan. This is because secured loans have lower rates and longer repayment terms.
Unsecured Debt Consolidation Loans
For those who are renting their homes or do not have any property to submit as collateral, they can consolidate their debts by acquiring an unsecured loan. Obviously, this type of loan doesn’t call for any security. Nevertheless, the borrower must have a stable job and show the lending company that he/she is capable with repayment.
Unsecured loans are known for having higher interest rates than secured loans. Understandably, lenders want to make up for the higher risk by imposing higher rates. Still, it doesn’t mean you should settle for a loan with unreasonable terms. Do your own research and find a lender who will extend you an unsecured loan with reasonable rates and conditions.
It is also worth noting that unsecured debt consolidation loans may be limited to smaller amounts due to the high risks involved. Borrowers who need to obtain this type of loan should make sure that they have a repayment plan prepared to ensure consistent payments.