The Real Benefits of a Secured Debt Consolidation Loan

Adam Brand Adam Brand | Operations Director

Consolidating your debt through a secured loan might be a good financial strategy if you have many existing debts at high interest rates. Consolidation is the process of taking out a single, large loan that you will use to pay off your other debts. A secured debt consolidation loan is a good way to get your monthly budget back under control and alleviate financial stress.

Secured loans are obtained by using the equity in your home as security for the debt, thus the name 'secured loan'. Whatever your equity is will be the maximum amount you are allowed to borrow. Having said that, most lenders abide by a strict loan-to-value (LTV) ratio for secured loans. An LTV ratio of 80%, for example, will allow you to borrow a maximum amount equal to 80% of your equity.

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What are the real benefits of secured debt consolidation loans? Consider the following:

1. Fast, Easy, Affordable

Among all of the different types of consumer lending products, few are as fast, easy, and affordable as secured loans. These are fast because it does not take long to process applications and paperwork. They are easy because they rely on the equity in your home. As long as you have enough equity to cover the amount you want to borrow, you will most likely be approved. As for being affordable, secured loans generally have lower interest rates and attached fees because of the security offered by your collateral.

2. Better Rates and Terms

A secured loan for debt consolidation purposes is likely to get you better interest rates than personal loans or credit cards. Once again, it all comes down to security. A secured loan is guaranteed by your property, so there is significantly less risk on the lender's part. Personal loans and credit cards are just the opposite. They have high interest rates because lenders are depending only on your promise to repay.

Repayment terms for secured loans also tend to be longer than other types of consumer financing. For example, some banks and building societies offer terms as long as 25 years. That makes borrowing tens of thousands of pounds more affordable for your monthly budget.

3. Loan Flexibility

One of the big differences of a secured loan is that the money can be used for a lot of different things. It is possible that you could take a debt consolidation loan worth more money than you actually owe. You could pay off your other outstanding debts and still have some extra cash in your pocket to finance other things. One word of caution though – do not take so much money that you cannot afford to repay it. Otherwise, you will be right back in the same position.

4. Taking Advantage of Equity

Would you agree that your house is a very big investment? It might even be the single largest investment you will ever make. As such, you should be able to use your investment as a way to improve your financial circumstances. That is just what you are doing when you use a secured loan to consolidate high interest debt.

The equity in your home becomes your own personal line of credit when you use a secured loan. Moreover, with low enough interest rates, using your equity as a financing tool makes borrowing more cost-effective. The money from a secured loan ends up saving you in the long run by reducing interest rates so that you pay less over the life of the financing. It is just that simple.

Secured Loan Expert can help you compare and obtain a secured debt consolidation loan that will eliminate your high-interest debt by combining it all into a single, affordable financing package. You will have one monthly payment that you can fit into your budget easily. So why not take advantage of your equity today by calling our team of experts who will guide you to the best options available for your individual needs.

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