How Secured Personal Loans May Offer Debt Consolidation Or Bad Credit Repair Assistance–Weighing The Risks For Borrowers

Individuals who are looking into a personal loan will often fall into one of two categories, which could mean that they either qualify for an unsecured loan or they may have to opt for a secured personal loan to meet whatever borrowing needs they may have. In the past, consumers have used these secured personal loans as a way to consolidate debt or simply as a way to diversify the types of credit they have and, hopefully, use this particular type of loan to improve their bad credit score. Yet, there have been reports here in September that consumer debt has increased in recent weeks, which can be attributed to lines of credit that range from credit cards to loans, but when it comes to this particular type of loan, borrowers need to make sure they fully understand how a secured loan could help achieve their specific financial goals.

Currently we are seeing low rates being offered on mortgages, but there have also been some reports that rates on credit cards have increased as well. What this means for a consumer in a bad credit position is that there are no set costs that may be seen on a secured personal loan, or any line of credit for that matter, as there are variables when it comes to borrowing that need to be considered. While a borrower may be able to get a secured personal loan for anywhere from around 12% to 22% or higher, collateral is also required and, depending on the lender, could impact whether a higher or lower rate is offered.

Ultimately though, what advisers are looking at in terms of secured personal loan use is why consumers feel that a personal loan is going to be helpful for their situation, and whether borrowing a secured personal loan that may come with a higher rate will be best for a consumer’s needs. Obviously, if an individual who borrows one of these loans can get a rate of 20% or higher and is able to make substantial payments on their debt on a monthly basis, meaning they pay an amount higher than their minimum requirement, this could keep the overall interest payments to a much lower level but this is where some borrowers may fail to realize that costs could become quite expensive.

Since secured loans are usually borrowed by individuals in a bad credit position, there are questions as to whether borrowers have a bad credit score as a result of poor financial practices that have led to debt or if unforeseen circumstances are to blame. Joblessness has been a huge problem for many consumers as there are some estimations that around 14 million men and women are unemployed, so these types of circumstances can lead to situations where consumers cannot pay their debts, their credit score may drop, and when they have found a more stable income at a later time secured loans may be their only option.

The decision to a secured personal loan to consolidate debt is one that only a consumer can make, as the costs specific to this route of debt relief will need to be calculated in light of how much a consumer owes, what rate they receive on a secured loan, and can they afford the total costs. Yet, if consumers are looking for secured personal loans as a way to improve their bad credit history, it may be better for these men and women to use current lines of credit, focus on simply paying their debts on time, and avoid acquiring more debt through options like secured loans as this could increase the ratio of the amount of debt they have in relation to their income.

While secured loans have been used to establish a positive item on a consumer’s credit history, even if rate increases were seen on unsecured lines of credit, like credit cards, a consumer may avoid higher costs if they make affordable purchases on current lines of credit they have and plan to pay off this debt in full each month, as paying off a credit card balance in total on a monthly basis could potentially keep interest rate costs down if proper practices are used, rather than consumers turning to a secured loan that may take a longer period of time to repay and also lead to higher interest rate costs in the end.