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A secured debt consolidation loan is secured against an asset (usually your home) and used to fold multiple debts into one, with more manageable monthly and/or overall costs. It’s also known as a debt consolidation mortgage. If you have outstanding loans, credit cards or other debts, it can often be difficult to manage and keep track of your ongoing repayments. By using a debt consolidation loan, you can merge your current debts and then only need to make repayments on the new loan.
Secured loans are a form of personal loan that use the equity you have in your home as security against the cost of the loan. This means that a secured loan represents less risk to the lender than a regular personal loan, so you’re more likely to be approved, and will also potentially get better rates and loan terms. If you fail to repay your loan, the lender can take ownership of your equity.
If you want to use a secured loan to consolidate debt, you’ll need to apply for a loan amount that covers the size of your existing debts. Once you’ve been approved for the loan, you can then use the funds to pay off all your existing debts. You then make repayments on the new loan until it has been paid off in full.
If possible, you should try to find a secured loan that offers a lower interest rate than your existing loans or debts, as this will help you save money on your repayments.
Yes, you can get a secured debt consolidation loan even if you have bad credit, and a secured loan may be the most suitable form of debt consolidation for those who have a poor credit history. As a secured loan is backed by the equity you have in your home, lenders see it as less of a risk than other types of loan, so you have a better chance of approval.
If you don’t own equity in your home, or don’t want to use it as security against a loan, you still have a couple of options when it comes to debt consolidation:
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