If you’re a tenant looking for a debt consolidation loan, the question of ‘secured or unsecured?’ won’t be an issue. Without any property to secure a loan against, you’ll basically have to find an unsecured debt consolidation loan or look for a different way of dealing with your debts.
For a homeowner, though, it’s a very real question. Is it worth securing debt against your house? On the one hand, you could be offered a lower interest rate and might be able to spread the repayments out over a longer period of time. On the other, you’d potentially be putting your property at risk (if you couldn’t keep up with the payments you agreed to make).
But not every homeowner will have the choice. If you simply don’t have enough equity in your property, you won’t find a lender willing to secure a loan against the equity that you do have.
These days, with property prices looking uncertain, there’s always the chance that your house’s value will drop and leave you in negative equity, meaning some or all of that loan could basically end up ‘unsecured’, since selling the property wouldn’t raise enough money to repay all the debt you’ve secured against it (including your original mortgage, of course).
If you’d like to know more, you could check out debtadvicenow.co.uk/debt-consolidation/, where you’ll find out more about the pros and cons of debt consolidation loans.
Whether you opt for a secured debt consolidation loan or an unsecured one, there are some things to bear in mind if you’re thinking of consolidating your debts.
First of all, remember that it’s a loan. You’ll have to pay it back, so you shouldn’t go ahead unless you’re confident you can afford to make all the payments as agreed.
Second, remember that repaying any debt more slowly can cost you more in the long run, as the interest will have more time to build up on your debt.
And third, think ahead. If you’re expecting some kind of significant ‘life change’ in the foreseeable future, think about how this could affect your ability to stay on top of your loan payments and other commitments.