Using Your Home for A Secured Debt Consoliation Loan
The tough economic times has many people doing what they can to get control of their finances. For many who have several loans, especially high credit card debt, this means consolidating those balances due into one easy to manage loan. For those who want to consolidate their debt into one loan this can be done with either a secure or unsecured type of loan based on whether or not the borrower has collateral to use or not.
For those who have their own home using their equity as collateral will get them the best consolidation loans available. Generally those who try to acquire unsecured loans debt consolidation loans will end up paying a higher interest rate on their loan. This is because unsecured loans are a higher risk for a lender so a higher interest rate is charged to offset this risk. Those who seek debt consolidation home equity loans tend to get a much better interest rate. This ends up meaning they will have lower payments and shorter payback periods since more of each payment is going directly toward the principle.
Of course these loans using your home equity to consolidate debt may be better when it comes to interest rates they can also have a very large risk to them. Since your home is used as the collateral defaulting on the loan can result in the lose of that property if the borrower gets behind on payments. This can easily happen if the borrower does not create a budget and stick to it. Many who require a debt consolidation loan since overspending got them into too much debt. These habits can continue after the debt consolidation home equity loan creating a situation they may not be able to get out of. But with a solid budget and good money management this is a great way to get control of your finances.
