Debt Consolidation is typically defined as taking your multiple
high-interest loans and consolidating them into one, low-interest,
convenient monthly payment. It is a quick, easy fix to get out of debt and
lower your monthly payments at the same time so that you can use your money
for better things, right? Read on... there are some things that the lenders
don’t tell you about their loans.
There are two types of Debt Consolidation loans, Home-equity lending (also
referred to as a secured loan), and Personal lending (unsecured loan).
Home Equity loans are given to consumers to consolidate their debts. You get
one monthly payment with, usually, a pretty good interest rate: between 9 –
12%. This may be a good option for someone who recently took a cut in pay,
divorced, unemployed, or just overspent their income and the debt repayment
became too great. However, the downside to this is that you are putting your
house up as collateral—if you fail to pay this loan you may find yourself
out of the streets.
Personal Lending loans typically have a higher interest rate, 12 – 15%, but
are not secured with collateral. The bank is taking a greater chance that
you will repay the money borrowed so the fees (interest) are higher. |
