Using A Secured Debt Consolidation Loan Responsibly

| June 27, 2013
Debt Consolidation

Debt Consolidation

If you are struggling with unmanageable debts then you may feel as though another loan is the last thing you need. However, a secured debt consolidation loan could be the answer to getting your finances back under control.

What Is Debt Consolidation?

A Secured debt consolidation loan is a sum of money which is borrowed using your home, or other collateral, as security in order to pay off existing debts. This combines everything into one single debt and therefore one single monthly payment. Often the single payment on a consolidated loan is lower than the sum of the separate payments was.

When consolidating multiple debts you will be giving yourself one large debt rather than several smaller ones and with the interest applied you may end up paying back more than you would have with the individual debts. However, if you were not able to meet the original payments it may still be worthwhile just to reduce your monthly outgoings and relieve some of the stress that comes with debt.

Can I Use My Loan For Anything?

It is clear that the intent behind a debt consolidation loan is to pay off existing debts. Once you have the money in your account there may be some temptation to spend it elsewhere instead of using it to close the other debts. This is a bad idea which will only result in spiraling debt.

If you were unable to meet the monthly repayments on your prior debts, you certainly will not be able to meet them plus the repayment of the new loan. Not forgetting that your new loan is also secured on your home. When securing a this type of ?loan it is essential that you use it for the purpose that was intended.

There are many lenders who will actually pay your debts off themselves, or issue the loan in the form of checks made out to the lenders rather than transferring the money into your bank account. This a great way to make sure the loan is used for the correct purpose and it is wise to ask your lender if they offer this service.

It is important to remember that a debt consolidation loan does not eliminate your debts, it simply moves them elsewhere in order to make them more manageable.

How Consolidation Affects Credit

In some cases consolidating your debts into one fixed monthly payment can be a positive thing for your credit. This is especially true if you are using the secured loan to pay off credit account which are maxed out. However, as with any new loan agreement it may also cause a short term drop in your credit score, so be prepared for that. In the long run this should correct itself and reflect positively on your credit history.

To summarize, if you are struggling to find your way out of debt and cannot make the monthly repayments on your credit cards and loan agreements, then a secured debt consolidation loan could be exactly what you need. However, it must be used only for paying off existing debts otherwise you are digging yourself a deeper hole. Ask your lender about direct payment to your creditors. ?A consolidation loan could have a positive impact on your credit score and they are available to people who have bad credit too. Look into secured debt consolidation today and you could be taking your first steps down the road to a debt free life.

Hugh Tyzack is both the founder and the managing director of, a lender specializing in providing loans to those with bad credit. One of Hugh’s areas of expertise is offering logbook loans UK car owners can trust. When he is not working, Hugh likes playing the piano and listening to a large variety of music. Catch up with him on Twitter?@badcreditloans8?and also on?Google+?.

Using A Secured Debt Consolidation Loan Responsibly


Category: Debt

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