IMPROVE CREDIT RATING

A debt consolidation secured loan is a way of combining all existing debts into one simple payment secured against your property. You can eliminate all unsettled car loans, leases and maxed out credit cards by finding one creditor offering you one secured loan, thus resulting into one lower overall monthly payment to that single lender who will pay off all your creditors for you.Debt Consolidation Loans: Secured versus Unsecured

A secured debt consolidation loan is a form of loan wherein you as a borrower pledge some asset as collateral for the loan. Assets can be in the form of owned cars or homes. Collateral is the security or guarantee you present to make the repayment. With your debt now secured against your property, your present lender or creditor can take possession of your property in the event that you fail to pay what you owe. The creditor can sell your property to recover the amount he initially lent you.

An unsecured debt consolidation loan, otherwise known as a personal loan or signature loan, is a form of loan not backed by any collateral. The sole basis for granting a loan and establishing the terms of the said loan is an assessment of your credit rating. Your credit rating is gauged based on your financial history and current assets and liabilities. It provides your creditor the odds of your paying the loan or not.

Advantages of Debt Consolidation Secured Loans

By having your debt secured against your property, your creditor will be eager to provide you a secured loan to cover all your outstanding debts and you can discuss and agree on terms to suit your needs.

You may be asking yourself why you should take on another debt to cover all your debts, and risk losing your house or car at that. Well, with the risk to the lender being reduced, you can expect the interest rate offered to be also lower; much lower than all your existing interest rates put together. Aside from that, you as a debtor can receive loans on more favorable terms that can be extended. Your creditor is sure to offer attractive interest rates and repayment periods for the secured loan.

Types of Debt Consolidation Secured Loans

There are two types of secured loans: mortgage loan and non-recourse loan.

A mortgage loan is a loan secured against real property or personal property. A mortgage is a monetary lien, a form of security interest, granted over your property to secure payment of a debt. Borrowers are personally liable under mortgage loans.

A non-recourse loan is a loan also secured against collateral. However, unlike the mortgage loan, the borrower is not personally liable. If the borrower or debtor fails to make the repayment, the lender can sequester the collateral, but regaining of funds is limited to the collateral. If the value of the property is insufficient to cover the remaining loan balance, then the lender has no other means to acquire the rest of the debt.

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