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Posts Tagged ‘secured debt consolidation’

Following years of cheap and easy credit, we are now experiencing an ever-deepening recession, and, as a result, many people are struggling to pay off unprecedented amounts of debt, with some barely affording to meet the minimum payments. The disatvantage with this is that the lowest required payment only covers the monthly interest on a debt, meaning the actual balance only decreases by one or two pounds a month.

Therefore it takes years to pay off the actual balance and a substantial amount of interest is paid over the term.

Debt consolidation is often a good solution for such people: a debt consolidation loan is used to pay off all existing debts and features a single, affordable monthly repayment. The quick guide below provides further information about debt help:

• Unsecured Personal Loan: These are available over different terms (1-7 years) and at various rates of interest (usually much less than the interest charged on credit and store cards). No security is required but an exemplary credit record is needed; lending criteria have been tightened as a result of the credit crunch.

Various amounts can be borrowed, usually from £1,000-£25,000, and with each payment made the balance decreases. If you use this method of borrowing to pay off debts you must be disciplined and make sure you do not increase your debts again (it would be a good idea to cut up store cards/credit cards).

• A Secured Loan: these types of loan are secured on a property (thus they are only suitable for homeowners) and are a possible option for those owners with less-than-perfect credit histories, the self-employed, those who wish to borrow large amounts (up to £50,000 or more), and those who require long-term repayment (up to 25 years).

Be aware that this debt is secured on your property and your home may be repossessed if you do not keep up with repayments.

Used responsibly, these two types of debt consolidation loan can save you a substantial amount of money in interest and can develope your credit rating (providing payments are adhered to).

If you wish to take out a loan, check out an online comparison site such as uSwitch to find the best deals and rates. Obviously, you will need to have an acceptable regular wage in the form of employment to get a loan.

Louise Bond, personal finance manager at uSwitch.com comments:

“As we embark on what is expected to be one of the toughest years in the history of the UK, it is vital that borrowers give themselves the best possible chance of servicing their debt in the most economical and manageable way possible.

If consumers are careful about managing their spending, a debt consolidation loan can help to reduce monthly repayments and it can also help to settle borrowings earlier, as repayments are fixed and set for an agreed number of years.

Borrowers need to be aware that taking out a loan or credit cards to consolidate debts must be approached in a disciplined way and should not be treated as a quick-fix solution to debt problems.

Those who consolidate their debt into a single loan should only borrow enough to cover all their debts and no more, and all existing debts must be closed down immediately.  The purpose of a consolidation loan is to reduce debts – consumers should not be tempted to fall into the trap of racking up these debts again as they could end up finding themselves in a vicious debt cycle.”

If you have debts and lose your job, you need to take action fast. Visit a debt advice agency such as the Citizens’ Advice Bureau. They will be able to advise you appropriately. They will work out a debt management plan for you and negotiate with any creditors on your behalf. Repayments will be based on your ability to pay and any interest will be frozen, meaning a big weight off your mind. Payments for people with limited salary can be as little as £1 a month.

If you are having difficulties with debt, whether you are in employment or not, seek the advice of a debt counselling agency (such as National Debtline) as soon as possible.

Loan consolidation is also known as secured debt consolidation. The thing is that most people have several types of debts that accumulate in time and get a lot of effort to manage particularly in terms of paperwork. Instead of working with all the creditors at the same time, why not get a single monthly bill for all. Here are some ideas to help you with secured debt elimination.

How can this get you out of debt? Well, there is a pretty tricky side to this issue. For really secured debt elimination you have to renegotiate your loans so as to get lower monthly repayment or more affordable interest rates. Before taking this step, you should find out about the fees and the credit contract conditions. With secured debt elimination you should first handle credit card debt, as it has the highest interest rate of all.

The best tip you can get is to further prevent credit card debt. It is a huge mistake to spend your budget in advance when you do not have an emergency. Millions of Americans make the mistake of investing in unnecessary things. Only use the credit card when you have an emergency such as some medical bills that need to get paid for which the health insurance provides insufficient coverage or when some other accident requires immediate cash.

If expenses are reasonable, then the secured debt elimination program should allow you to manage the budget in better conditions. If you are moderate in consume, your situation may be much better. Moreover, you need to know what expenses are worth using the house as a collateral because such a decision has major implications for the future. Choose such a solution only if you have no other!

Another thing that should be on your mind when trying to achieve secured debt elimination is the comparison of rates and prices. Sometimes lenders with a higher interest rates are more profitable because they do not charges balloon fees for instance. Therefore, shopping around to see what options are more convenient represents the best alternative under the circumstances. At least you can make an informed decision!