Using a secured loan to consolidate debt
If you have a build-up of debt from several different lenders and you own a property, a homeowner loan could help you turn things around a lot quicker than you think. Consolidating debt into a secured loan could help to:
- Reduce your monthly outgoings
- Reduce the overall interest rate on your debt
- Consolidate your payments into just one monthly payment
- improve your credit score
A secured loan can be useful if you owe a large amount or you have poor credit and are finding it hard to get approval for a personal loan that’s large enough to repay the existing loans and credit.
What is a secured loan?
A secured loan is similar to a personal loan in the way that it works; the key difference is that a secured loan is secured against your property. This gives the lender more confidence allowing them to provide you with a larger loan even if you have a low credit score. It is important to remember when considering a secured loan that if you are unable to make repayments, you may need to sell your property to repay the debt.
A secured loan is often called a second mortgage or a second charge loan because the lender takes secondary priority behind your main (first charge) mortgage if you’re required to sell your property.
To qualify for a secured loan, you’ll need to have equity in your home. Equity is the amount of the property that is yours, free and clear of your mortgage or any other secured loan.
How can a secured loan help you to manage your debt?
Keeping on top of your finances when repaying lots of different credit cards, store cards and loans can sometimes become overwhelming. Organising each debt into one monthly payment can make a huge difference when it comes to managing a budget and can take the stress away from repaying debt.
How can a secured loan reduce the interest you pay on your debt?
With a secured loan, the debt is secured against your property, meaning the risk to the lender is much lower. This means that the interest rates available are a lot more competitive compared to credit cards and personal loans. Consolidating debt into a secured loan could mean that the overall interest rate on all of your debt is reduced, allowing you to pay it back much quicker.
How can a secured loan reduce your monthly repayments?
Secured loans can usually be paid back over much longer terms. Meaning that not only could you reduce your interest rates, but also repaying over a longer-term will allow you to reduce your monthly repayments significantly. This could provide a much more flexible way to manage monthly cash-flow, allowing you to build a fallback in case something unexpected comes along.
How do I get a secured loan?
The great news is that you’re already in the right place, Cornerstone Finance can help you to discover the best option for you and your circumstances from a wide range of lenders. You can apply here.
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