Before entering into any agreements for consolidation of debt or debt counselling, consumers should understand their options and what each option entails. Understanding the benefits and pitfalls of each option, as well as the requirements and processes involved with them, can help consumers to make an informed decision and choose a method of debt consolidation that best fits their specific situation.
A secured loan for consolidation of debt is the perfect solution for a consumer who may have lapsed on one or two creditor payments, provided they have collateral to secure the loan.
Essentially, an applicant with an imperfect credit score can still consolidate their debts and convert all their various debts into one easy and affordable monthly instalment. When applying for a secured debt consolidation loan, it is important to consider the fact that lenders can seize the collateral should consumers default on their monthly payments – this is especially important when considering using large assets, such as your home, as collateral.
Although it is risky to use assets as collateral, it means that your debts can be settled when you aren’t in position to pay the loan and there is therefore no risk from sudden retrenchment or unemployment.
A secured loan for consolidation of debt remains one of the best alternatives to debt counselling or sequestration, but if debts are unmanageable and a loan is no longer available, debt counselling is still one of the best options.