By obtaining a secured debt consolidation loan, you can forget about the worries of making payments to several lenders at a time, and deal with only one, who will pay back all or most of your other debts. In some cases, they will even lend you some extra cash, but you have to offer some valuable assets as a guarantee that you will pay your debt. A consolidation loan comes with many advantages, but it can also have some downsides that you should be aware of before signing any contract.You can see ratings here at http://www.toptenreviews.com/money/debt/best-debt-consolidation-companies/.
A careful evaluation of all your options will help you choose the asset to use as collateral. This way, you will not be in the unpleasant situation of losing a valuable possession for a temporary financial advantage. Here is an insight on the available alternatives:
Types of Assets That Can Be Used as Collateral for Secured Debt Consolidation Loans
• Real estate properties – Using a house or a piece of land as collateral increases your chances of getting a large sum of money as a loan. The high value of these assets allows you to liquidate several small debts and even end up with some money in your pocket. On the other hand, you have to be very careful not to be late with your payments, otherwise the lender can choose to foreclose the property.
• Motorized vehicles – Cars are not the only valuable possessions you can use for guaranteeing a consolidation loan, boats will work too, sometimes even better, but, if you settle for this consolidation solution, you must have a very good credit history.
• Jewelry – Offering jewels as collateral, in order to get the money you need is a common practice, known as “pawning”. The amounts you obtain can be used for almost any purpose, including debt consolidation. However, the interest rates practiced by pawn shops are quite high, compared with those available for the other two types of collateral.
Secured Debt Consolidation Loans Pros and Cons
• Pros – The repayment period is much longer than that for unsecured loans. Also, since the lender can recover the money by selling the collateral, these loans are considered less risky and, therefore, have lower interest rates than unsecured loans.
• Cons – Usually, a secured consolidation loan improves your credit score, but it can also decrease it, if you do not keep up with the payments. You also risk losing the assets you use as collateral, so think twice before signing any loan contract and make sure you can afford the payments the secured debt consolidation loan involves.