If you are like a lot of Americans, you probably owe too much money on your
credit cards. It is easy to do; spending with a credit card is so simple that it takes almost no effort. In time, your credit card balance can grow, and soon, you realize that you owe a great deal of cash.
If this happens with multiple accounts, you can find yourself having to pay more money each month than you can afford, even if you only pay the minimum required amount. One answer is debt consolidation, where you take out a new loan in an amount that is equal to the total of all of your debts.
The easiest way to consolidate your debt is by obtaining a secured loan. A secured loan is one where you offer collateral to the lender in exchange for the loan. Secured loans are ideal for consumers who have an unfavorable credit history or who just don't have a long history of borrowing. Providing collateral gives the lender some additional assurance that you will repay the loan.
The most common types of collateral for such loans are either houses or automobiles. They are preferred by lenders, as it is easier to determine a market value for them and they can sell easily should it be necessary to do so. By offering collateral for a loan, you should receive a more favorable interest rate than you would for an unsecured loan.
Credit cards, for example, offer unsecured financing, and interest rates for
credit cards are commonly in the range of twenty percent annually.
The two ingredients that contribute to more reasonable payments are a lowered rate and a longer period of repayment. A typical home equity loan, which would use your house as security, might have a repayment term of ten years. The fairly long repayment time, combined with the more affordable rates that come with equity loans, should make your payments more affordable. Keep in mind that you are putting your property at risk with a secured loan. If you do not pay, you will lose your collateral to your lender.
Applying for a collateral-backed loan for debt consolidation purposes can help you sort out your money problems. You will still have to exercise some self-control, however, as the consolidation loan, like all financing, needs to be fully repaid. Failure to do so will put you right back where you started.
©Copyright 2007 by Retro Marketing. Charles Essmeier is the owner of
Retro Marketing , a firm devoted to informational Websites, including MendYourDebt.com, a site about
debt consolidation and financial scams, credit counseling, payday loans and personal bankruptcy.
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