Consumers who are looking for the opportunity to consolidate their debt with the use of a loan here in June may be in a position where a secured line of credit is their only option due to a poor credit score. Since many secured consolidation loans are associated with a homeowner’s equity this has become increasingly problematic for some and due to the fact that there are still decreases being seen in various areas of the housing market, some homeowners are simply in a position where they cannot borrow against equity in their home for the purposes of bad credit debt consolidation. Yet, even for those who do have this opportunity, some have failed to compare the rates that are available on these particular type of loans and, as a result, may find themselves in a dangerous position within their personal finances.
While there are, once again, some individuals who do not qualify for a secured consolidation loan, there are alternatives for not only those who are not in a position to consolidate their debt with the use of a secured loan, but there are some men and women who want to avoid consolidation altogether. Yet, rates on most consolidation loans that are being made through home equity loans, as an example, can be affordable as mortgage interest rates are still quite low, currently standing around 4.5% for a 30-year fixed, and if a homeowner is in a good financial position, they may be able to use the equity in their home to consolidate debts with a low interest rate attached.
Also, some homeowners have used these low interest rates to use cash-out refinancing as a way to consolidate various debts as they will essentially refinance their home for more than the value of their mortgage, and use the additional money to pay off what they owe. However, a home equity loan or cash-out refinancing can be a precarious situation since a borrower may find themselves in a position where they cannot pay off this debt and, as a result, will lose their home since this was a secured form of debt consolidation.
Sadly though, those who are not in a credit position are often not able to take advantage of affordable rates on a home-equity loan or refinancing, and this will obviously take away any of the value that may be gained from a secured consolidation loan, so alternatives need to be explored for bad credit borrowers outside of the secured options. While there are still some banks that may offer secured bad credit consolidation opportunities with other forms of collateral, consumers may want to explore options like debt management from a credit counselor, if they are having problems making their monthly payments.
Consumers may also simply call creditors and ask for reduced monthly payments directly, particularly if they have a good credit history and have simply fallen upon hard times. Many credit cards or banks will be lenient to good customers, especially if they can show financial hardship has arisen, so turning directly to a secured consolidation loan may not be the best option for all consumers, but even if this is the case, comparing the costs and rates will also need to be part of the process, as some consumers may find that the rate they receive on a secured consolidation loan will, over the long run, be more expensive than had they simply continued to pay off debts separately.