Secured And Unsecured Bill Consolidation Loans
September 2, 2014 Leave a comment
There might come a time when you are considering taking a bill consolidation loan to consolidate your debts. This will help to put all of your debts into one loan and give you one payment and one interest rate to make every month. Having this will help you to pay off your debt quicker and will allow for a total payment to be smaller every month. When you set out to look for your bill consolidation loan you will find that a lender will offer you two different types. These are a secured loan and an unsecured loan. Before deciding what type of loan is best for you it is important to know the difference between the two.
Secured Debt Consolidation Loan
When you obtain a secured debt consolidation loan you will need to have some sort of collateral to secure the loan amount. What this means is that you will be required to pledge personal property in order to be approved for the loan. A bad credit lender will want to see proof that the property is in your name. Common types of collateral that borrowers use are a vehicle or a home. Once the lender agrees to loan you the money using your collateral the signed loan agreement will include a document that basically signs over the property to the lender. Of course once the loan is repaid in full there will be paperwork completed that will return the property back to your name.
There are several benefits that people enjoy using a secured loan. The biggest of these benefits is that the interest rate on a secured loan is much less than that of a loan, which is unsecured. Also with a secured loan the total loan amount can be larger. The amount is usually figured upon the value of the collateral.
Unsecured Debt Consolidation Loan
If it is an unsecured debt consolidation loan that you are interested in you will find that there is no collateral involved with this loan. Most people believe that you will need a great credit score to obtain this type of loan. However the good news is that if you have bad credit it is still possible that you can be approved of course the interest rate will be much higher than if you have a good credit score. The reason behind this is that the lender will be taking a high risk and will need to protect the loan against you not paying the loan back.
The benefit of an unsecured loan will be that because there is less paperwork involved you can expect that the loan will be processed faster and you will receive your money much quicker
So when you are looking for a debt consolidation loan each person will have a different financial situation. The loan that will be the best for one person may not be the best loan for another person. If you have any questions regarding the type of loan you need to obtain you should speak to a loan representative.