Using A Secured Consolidation Loan With Bad Credit May Offer A Lower Rate But Arguments Remain Against Offering Collateral

Consumers who are facing multiple debts with a bad credit score in place have often found themselves in this situation for a variety of reasons as some may have simply spent more than they could repay, others have seen their wages decreased substantially due to changes in their employment situations, while there are also still consumers being impacted by unemployment that has remained above 9%, with certain states seeing this rate much higher than the national average over the past few months. Yet, as a result of a low credit score and difficult debt repayment obligations, there are consumers seeking debt consolidation through secured loans, as lower rates may be available for bad credit borrowers if collateral is offered but this will not always make a substantial difference in instances where a potential bad credit unsecured loan used for debt consolidation is also an option for a particular consumer.

What this has brought about are arguments that consumers should avoid using collateral if they had deemed a debt consolidation loan to be best for their situation, as even the idea of using a consolidated debt repayment plan is something that financial advisers disagree on no matter the situation. Yet, some consumers feel that the lower rate on a consolidation loan will be more advantageous as some secured debt consolidation loans or unsecured loans available for bad credit borrowers may range anywhere from 18% to 24% or higher, as there are no standards when it comes to how much these loans will necessarily cost a consumer. The bad credit situation of each individual borrower will differ and, as a result, this could lead to more affordable rates on a secured debt consolidation loan or some consumers who have seen financial setbacks in their life could potentially qualify for a traditional debt consolidation loan, but at a slightly higher rate.

The message that many financial counselors have been stressing as of late is that interest rates can matter substantially when it comes to the overall repayment costs that a consumer must face but secured debt consolidation loans also come with the risk that the collateral presented could be lost. This is especially troubling when a consumer uses their home as collateral to consolidate debt as there is a great deal of uncertainty among many consumers in the area of their job or income, and even those who may be in a stable position do not necessarily manage their funds in a way that will make repaying a consolidated debt obligation a sure thing.

It’s because of these concerns over using a secured consolidation loan for bad credit debt consolidation that some consumers may have turned to outside advice, like credit counseling agencies, to weigh their options, but some have gone so far as to speak with their creditors directly in the hopes of working out a more affordable payment arrangement. In the end, a secured debt consolidation loan has helped some bad credit borrowers, but it’s often pointed out that this is by no means the only debt relief opportunity that may be beneficial for a consumer’s specific situation and as a result of this there are those who are looking at ways where collateral may not have to be offered in association with paying down debts and, by doing this, consumers may minimize or eliminate their risk for loss.