If you’ve got a mountain of debt, so much that you cringe when the phone rings for fear of which creditor will be calling, or you avoid getting the mail because it is mostly just bills anyhow, you’d like to get rid of them. If not get rid of them, how can you make them more manageable? Is there a way to “win” using a secured personal loan for debt consolidation? While getting an unsecured debt consolidation loan is attractive with bad credit it may be impossible.
Things You Should Know Before You Sign
Companies that sell secured personal loans for debt consolidation will tell you whatever they must to get you in the door. They may promise you a loan at a pretty good rate, then when they really run the numbers it ends up being an even higher interest rate than what you’re currently paying, because your credit probably isn’t that great anymore. With this kind of company, and this kind of loan, you can end up with a lower monthly payment, but at the cost of longer payments overall.
They’ll make it sound so much easier – they take care of everything! Negotiate with your creditors for lower interest rates, reduce your out-of-pocket amount each month, and you just breathe easier again. Actually, the company offering the secured personal loan for your debt consolidation is building a hefty fee into that monthly payment. It is often about 10% of what you’re paying. They pay the rest to the creditor, who then gives back that 10-15% to the company who “made it all possible,” the debt consolidator.
When you give your money to the debt consolidator, you’re taking the risk that they might not get your payment in on time – or in at all. If that happens, there is damage to the agreement you have with the creditor and definitely damage to your credit report.
The things the company offering a secured personal loan for your debt consolidation will do are things that you can do on your own behalf. You don’t need an intermediary! You can negotiate with your creditor to get a lower interest rate. You can talk to them about changing your repayment schedule so it is more manageable on your budget. And you can pay off the highest-interest debt first, to reduce interest payments overall. Is it worth it to pay the company offering you a secured personal loan for your debt consolidation to do it for you?
Finally, remember that a secured personal loan for debt consolidation is secured against some type of collateral – whether it be your home or car or savings account. In the event that you don’t get your loan repaid, you could end up losing your collateral. Be cautious before you sign on the line.
