It’s important to understand the difference between the unsecured and secured debt consolidation loan before opting for any of those. Secured loan uses the asset of the borrower as the possible collateral in case of missing payments. This is rather traditional type of loan, since the ability to claim the collateral ensures the stability for the lender. Any valuable things like cars, house and other real estates can be the collateral.
The secured loan has a lot of similar features with the mortgage. The company is able to sell your property and refund the money in case you do not pay off the debt. This kind of loan offers lower interest rates then the unsecured one, since the risks here are less than in the other case.
On the other hand the secured loansprovide the great risk for the debtor, since you might lose your property in case your life circumstances change drastically. That is the main reason for never to take the secured loan for paying off the unsecured one.
How to get your debt consolidation secured loan approved?
First of all you shall decide on your collateral. Be aware that you’re going to risk this item of your property, since there’s the possibility the lender takes it to sell and get his money back. The safest option will be your own home, since in case of trouble you can take the home equity loan, the credit line for home equity or even opt for the second mortgage. If you don’t feel like risking your own home, use the other belongings for the collateral. These might be the car, boat, or even some expensive belongings like electronic devices or jewelry.
The second step is to find the lender. Since you’re opting for the secured loan, make sure your lender is the reliable person not seeking any illegal ways to get your property. See if the selected lender is ready to opt for the offered collateral, especially if you’re not offering the house or a vehicle.
The third step is to compare the offered rates and terms. Before opting for any kind of loan, make sure you get the best possible terms and rates. Imagine how awful it will be to sign for the loan and then find out the better conditions for the same amount of money. Compare at least two or three loans in order to find out the best one.
Keep in mind that secured loans are possible even for the people with not really good credit history. By offering some of your property you pose yourself as less risky borrower, so the creditor will consider it possible to deal with you.