18 Dec What is a Secured Debt Consolidation?
When facing bankruptcy, people tend to explore any and all potential alternative routes available. Depending on your current financial situation, you will have different options to consider. Those that are not in dire financial straits can always look to an option such as personalloan.co, though this doesn’t quite work for people facing bankruptcy. For some, the possibility of consolidating your payments through a credit counseling service is an attractive option. Or, you may be able to apply for a loan that will consolidate your debt through what is known as a debt consolidation loan. Generally, you can go about receiving a debt consolidation loan in one of two ways: one that is secured by attaching it to your home equity/valuable assets, and one that is not. Acquiring a debt consolidation loan through a non-home equity/valuable assets secured method requires monthly payments, which can come attached with high-interest rates that are not terribly attractive. For this reason, secured debt consolidation loans attached to your home equity or other valuable assets is often a better path for those looking for alternatives to filing for bankruptcy. To put the matter simply, a secured debt consolidation loan allows you to gain a line of credit to keep you out of bankruptcy by putting your assets up for collateral. By implementing this form of debt relief into your finances, you are combining all of your debts into one account, allowing yourself to use one loan to pay off multiple other loans. One positive of gaining a secured debt consolidation loan is that your assets will become much more valuable than if you had just sold them off post-bankruptcy. Often, you may be able to obtain a line of credit that is close to the original value of said asset(s). Retirement savings can also provide a source for a secured debt consolidation loan. From borrowing money from their 401K, anyone can work towards avoiding filing bankruptcy. In fact, you are not even required to undergo a credit check to go this route. However, you must remain employed by the company you are drawing the 401K payments from to use this resource. If you are laid off or leave your position, you may be required to pay back the loan in a short period. Taking a look at a list of the pros and cons of debt consolidation can prove useful when making your final decision: Pros: • It will keep you out of bankruptcy. • They tend to have lower interest and fixed rates than other options. Cons: • All of your valuable assets will be put at risk. • Your credit score can be harshly affected. • Repayment periods are lengthy, leading to large long-term expenses.