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Secured Loans And Remortgages Are Great Debt Consolidation Loans
Hassled by creditors everyday? Then perhaps it’s time to sit down and think about an appropriate solution that will make all your problems go away.
Being in debt can be painful. The ongoing harassment by creditors isn’t going to go away just like that. It’s up to you to do something about the situation. There are many approaches when it comes to debt management. One of the easiest ways is to take a good look at your existing assets. For instance, you may be the owner of a home that has acquired equity over several years. Maybe now is the time to cash in on that equity and solve your debt problems.
You can do so by either taking out a secured loan, or go for a remortgage.
What is a secured loan?
A secured loan is a loan that is backed by your existing assets. The exact terms depends on numerous factors such as the loan amount, the value of the assets, and the repayment terms. If you fail to pay back the money on time based on the repayment terms, the lender has the right to forfeit your assets.
What is a remortgage?
A remortgage is like having an extension for your existing mortgage loan. For instance, your home may be full paid up. But in order to raise the amount of money you need, you opt for a remortgage. The bank provides you with another home loan and you get a lump sum payment. You can use the amount of money you receive to pay off your debts and manage your finances. Of course, now you have to service a new loan. Note that you don’t have to wait for your home to be fully paid up to qualify for a remortgage. As long as your home has equity, you can opt for a remortgage.
Secured loans and remortgages are two options you can choose from. To find out which option best serves your interest, speak with a professional debt management consultant. They will be able to provide valuable advice. You will need to find out the prevailing interest rates for the amount of money that you will be borrowing. An appraisal on the property may also need to be conducted to find out the current market value of the property.
Some homeowners are fearful about pledging their property for a loan as they are afraid of losing their home. But look at it this way.
If you are in debt, and you are unable to meet your monthly payment commitments, you are going to lose your home anyway. So it’s better to take up a loan just to tide you over the current tough patch. Understand that this situation is only temporary – no one stays in debt forever.
When you borrow money to repay your debts, you are taking passive action. And that is commendable. The monthly repayments may also force you to stay focused on managing your finances. In the process, you will be developing better money management habits. That will help you to stay off debt once your current debts have been fully repaid.
What is a Consolidation Loan and How will it Benefit you
Simply put, debt consolidation involves taking out one larger loan to pay off an existing debt.
Why would anyone want to take out a loan to pay off another loan?
The answer is simple:
A Consolidation loan allows you to make one payment every month, as opposed to making payments to many different parties. You will in effect be putting all your debt into one big pot, and making one monthly repayment, at a lower interest rate.
The loan is paid back at a lower interest rate when the debt is consolidated, because the loan that is taken out is secured against an asset. The asset acts as collateral for the institution lending the money. If you borrow the money and default on your payments, you can be forced to sell the asset to pay back the loan.
Debt consolidation can be a good way to pay off credit card debt. The interest payable on a credit card will be significantly higher than the interest on a consolidation loan. The interest payable on a consolidation loan can be up to 50 percent lower than credit card interest. The same can be said for administration charges on your various monthly expense accounts. Consolidating your debt will lead to savings on these accounts because you will only pay interest and fees on one account.
The institution that you lend the money from will also help you to structure the repayments so that they fit in with your budget. Your monthly income will have an effect on your monthly repayments each month and the total amount you will be allowed to borrow.
Loans can be secured or unsecured. A secured loan involves using your home as collateral for the loan. If you fail to make your monthly payments the bank can force the sale of your home. The advantage of a secured loan is that you will be able to lend a much larger amount than you would in the case of an unsecured loan.
An unsecured loan involves lending money without having to put up any collateral for the loan. While this protects your property from foreclosure the amount you will be able to borrow will be considerably lower. The interest rate will be higher because the bank has no security in the event that you cannot pay back the loan.