Secured Debt Consolidation

Looking for a secured debt consolidation loan? Or at least wondering what these types of  loans are all about! Many people have many loans - we tend to acquire little bits of debt here and there as we go thru life. You may have quite a number of fairly small, say less than $10,000 loans. Loans such as unsecured personal loans and student loans tend to be low value loans in this sense. Loans on hire-purchase and shop cards and even credit card outstanding balances could all come under the "annoying but small" loan banner. The idea with secured debt consolidation loans is that you take out one consolidation loan to pay off all your annoying little loans. There are several advantages to the borrower - but there are pitfalls as well for any borrower who is looking to consolidate secured debt.

So what is the marketing strategy for those looking to talk you, the consumer, into debt consolidation for secured loans? Generally these lenders like to talk about the simplicity of having a single monthly payment for all your debts. This has some merit but you also might want to think about the chances that you will actually be able to make this super-payment when its due. If you are paid weekly or fortnightly you are going to have to budget for this amount. Worse what if you paid monthly but the check doesn't clear until after your loan payment is due? That means you are going to have to think about budgeting a whole month in advance for your loan payment

Secured Loan Consolidation - Points To Consider

Another major issues with secured loan consideration is the word "secured". You are going to need to offer collateral for this loan - and your collateral is at risk if you fall behind with payments. The type of collateral often used for secured consolidation loans are usually homes or cars. Sometimes companies will also take valuable items such as precious metals, jewelery and antiques as collateral. In all cases the issue is the same the reason you are getting the attractive interest rate is because the lender can always foreclose on you and take your asset. Do you really want to lose your house, car or even Grandma's paintings over a few thousands of dollars of personal loans?

Also there is the question about total interest that you are going to pay on this loan. If your current personal loan is for a shorter period of time but a higher interest rate, you may be paying a total amount of interest which is less than if you consolidate the borrowings into a new which is cheaper as far as interest is concerned but has a much longer loan period. Yes your repayments are lower now - but you may now be paying for a car long after the vehicle itself has gone to the wreckers.

Many people want to consolidate their personal debts so that they can reduce their payments to make ends meet. This can be the only solution for people who have recently lost their job or have had sudden unexpected costs such as moving or illness and medical bills. But long term the question that really needs to be asked is why? Why are you robbing Peter to pay Paul? Why are you financing your lifestyle by debt when in fact you could be a whole lot better if you look at the spending side of the equation. By that I mean sure you can refinance and reduce your payments for debts - but why not just stop spending? Reduce your consumption and you will be able to afford your current debt repayments - in fact if you make an effort you could even accelerate your debt repayments - and as one debt is paid off you can use the money which you were paying towards its monthly repayment to another debt. Pretty soon you can snow ball your debt repayment schedule - and end up debt free - or at least with your debts under control - thats a much more positive way to sort out your current lifestyle rather than just rearranging your loans. Consolidation loans can be a useful stop-gap measure, but that is all they are, at the end of the day all you are doing is rearranging the deckchair on the Titanic - not avoiding the financial iceberg.

If you do decide to go the way of debt consolidation make sure you check out any company that you chose to consolidate secured debt with. Make sure that they are members of the appropriate industry bodies and that they are not a known bad risk for you the borrower. Good luck finding the right debt consolidation plan for you and your finances.