| Secured, unsecured, debt consolidation, what does it all mean? What are my options? What are the best loans for debt consolidation?
If you are struggling with debt and are fed up and ready to do something about it, just remember you do have options.
A consolidation loan could be a good way for you to go. This is simply a loan that will give you enough money to pay off all of your debt with one lump sum. Instead of having many small payments a month you will have one payment a month and it will usually be less than the other payments combined.
The way credit cards calculate your payments works in their favor, not yours. If you pay only the minimum monthly payment you are applying little, if any, of the payment to the principle. Almost all of your monthly payment goes to interest. You will never be able to pay your card off like that.
The only way you will ever be able to get ahead is to pay something on your principle every single month. Even if it's only a small amount make sure to pay something on your principle.
The two main types of loans are secured and unsecured.
A secured loan will require you to put up collateral which is usually your home. You are just taking on a second mortgage. Because the bank has collateral the risk to them is much less so these types of loans are generally easier to get.
The downside is that if you aren't careful you could lose your house. Many people fall into the trap of getting a secured loan, paying off their credit cards and then going right back out and racking up a lot of debt. This time instead of just having credit card payments they also have another house payment. That can really make for a stressful time.
An unsecured loan won't put your house at risk, but since the bank doesn't have collateral they are taking on a lot more risk which is why these types of loans are much harder to get. If you don't have excellent credit you won't qualify for an unsecured loan.
Even if you do qualify you still have to make sure you don't fall into the trap of going out and using your credit cards until they are right back up to the limit. The bank isn't going to bail you out again so if you get in over your head you are on your own.
At this point it doesn't really matter why you are in over your head. It's more important to find the best loans for debt consolidation for you. Get your debt under control and vow to not repeat the financial mistakes that got you here in the first place. |