Earlier this month the Federal Reserve released statistics stating that, as of July, consumer credit had somewhat shifted as lines of non-revolving credit, like personal loans, had increased and there was some indication that credit card debts had fallen, but we have also seen some reports that consumers are becoming more confident in terms of credit card use and have increased the amount of debt they have in this area. However, bad credit has been the result for many consumers who have had trouble in areas like housing or their job, which have led some to seek out ways which may be available to consolidate their debts, and for those in a poor credit position, secured debt consolidation loans may be the only affordable option available for bad credit borrowers.
Yet, this has led some financial officials to point out that getting an affordable rate on a secured debt consolidation loan may not be easy for some, nor is a debt consolidation loan always going to be in a consumer’s best financial interest. Obviously, there are further concerns when it comes to what may be used as collateral for the secured debt consolidation loans, so this has prompted many financial advisers to urge consumers to make sure they explore all of the debt relief options available before settling on a secured debt consolidation loan.
Understandably, some consumers may be in a position where consolidating their debts will be necessary if they can get a lower overall monthly payment, but secured debt consolidation loans may come at a high interest rate depending on the financial position of the consumer. Some secured personal loans may be around 18% to 20%, but this will obviously vary depending on factors like a borrower’s income, their credit score, and their credit history as well.
Also, some consumers have even gone so far as to use their home as collateral so that they can consolidate various personal debts, and this is one reason why there are financial officials who stress looking into alternative plans since a consumer doesn’t want to risk losing their home simply to pay off other debts that may be unsecured. Yet, there’s nothing wrong with a consumer looking for the right debt relief plan nor does everyone who gets a secured debt consolidation loan come out the other side in a worse position or in a situation where they would have been better off not using a consolidation loan.
This is where the personal decision of a borrower comes into play, as there are men and women who may find that a secured debt consolidation loan may be more costly but due to financial problems it may be their only route to avoiding these payments. However, many lenders often have hardship assistance plans in place that can lower a consumer’s payments for a set period of time, and it may be worth speaking with lenders to inquire about whether these options are available so that a consumer in a bad credit position does not have to seek out one of these secured consolidation loans.
In the end though, if a consumer with a bad credit score does believe that a secured debt consolidation loan is their best bet, it’s often stressed that borrowers make every effort they can to pay off this loan ahead of schedule by meeting more than their minimum payments, as this will obviously help them not only erase this debt faster, with the potential for doing so at a lower overall cost, but paying off a secured debt will erase the likelihood that if further financial troubles arise the borrower would lose collateral associated with one of these loans.