Debt consolidation literary means “combining” all your debts,so you don’t have to make repayments to multiple lenders. The way this is done is you take a secured debt consolidation loan with a longer repayment period (amortization period) then pay off all your smaller debts, bills and loans to remain in debt with only one lender.
Well, technically speaking it’s not possible to place all your debts under one lending authority. Reason being, all lenders are unique in terms of the interest they charge as well as the repayment terms. But if you are a homeowner, a secured debt consolidation loan allows you toclear all other loansapart from the new one.
Secured vs. Unsecured Loan
A consolidation loan can either be secured or unsecured. The former, also called a secured debt,works with a collateral as security while the later doesn’t. Thecollateral, in this case, is the home, which ideally is why the loan attracts a very low interest. In this case, you’d get aprivate mortgage in Toronto, and use the proceeds to pay off your high interest, unsecured debt.
With unsecured debts, you don’t have to offer the lender something to hold onto, which may be a great solution to people with no property under their name, but are willing to pay a higher interest rate—such loans, mostly exist in form of credit cards.
Benefits of a Secured Consolidation Loan for Homeowners
Experts recommend secured loans citing that they are more affordable and can help their clients get out of debts faster. Other than that below are other significant benefits that come with secured loans:
Single payment –Making payments to several lenders each month can be so tedious. If you fail to submit payments for whatever reasons, you’ll have to answer calls and emails left, right and center, contrary to when your debts areconsolidated, because you just have to focus on one lender.
Easy to get approved and manageable terms–to have your debt consolidation loan approved all you need is a viable security or a property with some accumulated equity. Also, other terms in this types of loans are often lenient, one being a longer repayment period, which significantly lowers the repayment.
Lower Interest – apart from low a monthly orprincipal repaymentamount secured loans also come with a better interest. As such, consumers end up saving money even in the midst of servicing a loan.
You can take advantage of the “build” equity–consolidation loans for homeowners use the equity build on the assetas a ground to give the funds. That means even if you have a first mortgage tied to the house you can still consolidate your debts using the property.
As a matter of facts, this is a great way to manage your debts while saving a buck here and there.However, it’s highly advisable that you do your homework thoroughly before consolidating your debts with any lender. At least compare to see the service with your best interest at hand, or consult with debt consolidation experts to be on the safe end.