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Can I Consolidate my Debts with a Personal Secured Loan

Debt consolidation continues to grow in popularity as more and more people realise the savings they can make from doing so. Debt consolidation is a relatively simple concept. You first assess all your existing debts. Most people will have a number of outstanding debts from various sources such as credit cards, store cards, bank overdrafts, car loans and other personal loans. These will all be charged at different interest rates but because of the nature of the debts, the rates charged are generally quite high. For example, typical credit card rights currently run at over twenty per cent and sometimes as high as thirty per cent.

What debt consolidation does is allows you to take out one loan that will be enough to pay off all these other outstanding debts. You will then be left with just the single consolidation loan to repay. The consolidation loan should be far cheaper with a much lower interest rate than the other loans. This will save you literally hundreds each month in interest payments. Added to this you have the convenience of knowing that you only have to make one payment each month and you know before hand how much it is so your budgeting will be much easier as a result.

Security Required

Generally speaking, consolidation loans will usually be available on a secured basis. This means you need some sort of asset, such as a house, to secure the loan over. If you do not have security, then it will be much harder for you to be able to get a consolidation loan. Therefore, for the vast majority of consolidation loans, you will need to be able to offer some sort of security in exchange for the loan.


If you are not a home owner and therefore are unable to offer such a home as security for the loan, there are alternative ways of going about getting a consolidation loan. You may have close family members who are willing to step in and guarantee the loan. For example, if they have their own home, they can agree to allow the loan to be secured over their home instead of yours.

This means that they will be liable to repay the loan in the event that you fail to do so. Other options may be to get an unsecured loan. However this is likely to be difficult for a number of reasons. The main one being that unsecured loans are far more risky, and generally if you are seeking a debt consolidation loan, you have a significant mount of outstanding debt already and will be considered too much of a credit risk by lenders. Therefore, in the absence of either a personal guarantor, or some sort of security such as a home, it will be very difficult indeed, for you to get a consolidation loan.

Getting The Cheapest Loan

The reason debt consolidation loans are so much cheaper than other debts, and therefore manage to save you so much in interest payments, is mainly due to the fact that it is secured over your property. While it is very advantageous to be paying lower interest rates, you should carefully consider the risks involved with guaranteeing credit over your home. The main risk is that if, for whatever reason, you become unable to repay the loan, you will be putting your home at risk. Secured loans give the lender a direct right to come in and take your property from you if you become unable to meet your repayment obligations.

So, for example, if you secure a loan over your home and then fail to make the loan repayments, then the lender will be able to legally take possession of your home and sell it in order to get back the amount you owe them. The balance will be returned to you, however, if you have children or other family obligations, you will not really be in a position to take these types of risk with your home and should therefore consider very carefully if you will be able to meet the repayments on any loan you are advanced.

The other reason that secured loans will save you so much is because the loan is less flexible than credit cards and other such short term loans. The loan will be for a set amount spread over a specific period. For example, you could borrow ten thousand to be repaid at a certain interest rate, say seven per cent, over five years.

Repay the Loan Early

If you would like to borrow more, or repay the balance early, you will have to call the lender and get specific permission to do this. There may be fees involved if it is even possible and therefore you can see that this is a lot less flexible than simply having a credit card or bank overdraft. However, for the amount that is saved, consolidation loans are a very good idea for home owners who are seeking to clear their debt.

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