Types of Debt Consolidation Loans
Are you thinking of opting for a debt consolidation loan? A debt consolidation loan should be taken only if you are deep down in debt and can perceive the situation to go from bad to worse. Normally, it is advisable to take a debt consolidation loan only if you are unable to pay the loan amounts due on the various loans you have like home loan, auto loan, credit cards, and any other loans. There are times when people miss out on two consecutive loan payments and due to the interest rate the loan amount become bigger and it is indeed difficult to pay off immediately. If you have multiple loans where you have missed consecutive monthly payments then the best option is to opt for a debt consolidation loan so that you can get your loan payment and overall finances back on track.
But there are certain things that you need to know about debt consolidation. One such thing is the fact that there are two major types of debt consolidation loans and they are secured loan and an unsecured loan. Debt consolidation loan is always an attractive option but if you are struggling to keep your monthly payments in control, then you need to use this type of loan very cautiously. In a secured debt consolidation loan, you will need to provide collateral and this means that you will have the advantage of qualifying for attractive loan terms as well as interest rates. In a secured debt consolidation loan, you will also be able to spread your loan repayment over a longer period of time.
On the other hand, in an unsecured debt consolidation loan, you will not be required to provide any collateral but your interest rates will be high. You will also enjoy greater repayment flexibility but if you are unable to pay the loan amount then you might even lose your home.