Any type of secured loan is the easiest to get from creditors when it comes to applying for a loan.
A secured loan simply means that the borrower has enough to cover the loan amount.
The collateral for the loan can be a house or even a car.
Secured debt consolidation is consolidating debt into a loan that is secured by the borrower's asset.
Depending on the lender, assets such as real estate, personal belongings, jewelry or stock may be provided as collateral.
These types of assets are typically used when the borrower wants to consolidate but does not have credit that is acceptable for the loan.
Of course there are many benefits to a Secured Debt Consolidation, that there are also pros and cons that go along with them.
Pros: 1.
These loans are helpful for people who have started to hurt their credit.
2.
Relatively easy to get.
Lenders readily accept stocks, bonds and real estate as collateral.
3.
Only one lowered payment each month.
4.
Bankruptcy is avoided.
5.
Only one monthly statement.
6.
Equity line of credit is an available option.
7.
The collateral in the loan lowers the interest rates.
Cons: 1.
More risk to the lender.
2.
If you default on the loan, your asset may be lost to the lender in repossession.
3.
Longer time period to pay off debt.
4.
During the application process, penalization fees to creditors might have to be paid.
5.
Can get expensive in the long run.
6.
One will remain in debt for a long time.
7.
You may end up paying more in interest in the end.
8.
Easier to get yourself further in debt with accessible money.
The pros and cons of debt consolidation will vary from case to case and between individuals.
It is important to know them and compare them before agreeing to any type of debt consolidation.