Hi folks..How are you doing today? Today I am gonna discuss about a very common but important way to get rid of your debts. The option is called “Debt consolidation”. Most of us already know what debt consolidation is all about. But those who are just now fallen into a debt trap, for them I would like to repeat the basics.
Debt consolidation is a process of paying your debts easily. Here you’ll avail a single loan to pay off your other multiple debts through a monthly single payment. By this way it is easier to handle your total debt amount. The most important benefit of the debt consolidation is that it can lower your total monthly interest while paying the total debt amount way before your actual time without getting any kind of negative impact on your credit score.
Two ways toward debt consolidation
There are two separate kind of loans which can be normally being used while consolidating debts in different scenarios. The first one is 1) Debt consolidation through unsecured loans, and the next one is 2) Debt consolidation through secured loans. Both methods have their own specialty and benefits. Let’s have a look on these loans and their characters :
Through Secured Loans – You can get several options for using secured loans while consolidating your debts. You can easily opt for refinance option, take out a 2nd mortgage, or pick a HELOC (home equity line of credit). On the other hand you can get a car loan by using your vehicle as a collateral. Your assets can be a big source of funds to payoff your debts. You just have to use them as security. Even your retirement fund can be used for taking a 401K loan. Insurance policies with cash values can be treated as collateral for getting a loan. More or less, several financing firms can also provide you support, and grant you a loan against annuities, lottery winnings and lawsuit claims.
Now the question is it a right option for you? It can only be determined if we come to know the pros and cons of taking a secured loan for consolidating your debts.
Benefits of using secured loans for debt consolidation
a. Sometimes secured loans have lower interest rates compared to unsecured loans. This option will help you to cut off several dollars from the monthly payments and save your money a lot. So basically, lower rates of secured loans will make the monthly installments much affordable than usual.
b. The interests sometimes considered as tax deductible. There are many cases where the interest payment is allowed to get the tax benefit if the loan is secured by a real estate property.
c. Secured loans are easy to get as they are carrying less risk than an unsecured loan. A lower monthly installment, an affordable payment once in a month, and lesser risk for the lender makes it a wise option to select.
To be contd…..