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Should I secure a debt consolidation loan against my house?
16 August2021
When you're looking for a debt consolidation loan, there are a few things you'll need to decide. How much do you want to borrow? How long do you want the loan for? What kind of interest rate are you looking for?
You may also have to decide whether you want to secure your debt consolidation loan against one of your assets. This usually means your house, but you might be able to secure a loan against other valuable assets, like your car.
Is it a good idea to secure a debt consolidation loan against my house?
If you secure a debt consolidation loan against your property you are basically giving the lender protection against losing their money: if you failed to keep up with your repayments as agreed, you could end up losing your house.
So it's a big thing to consider - you'd have to be confident that you could make all your monthly repayments as you'd be putting your home at risk of repossession if you didn't. If you are confident, a secured debt consolidation loan can bring a number of advantages.
You might be able to access better interest rates than if your loan was unsecured, for example. You could also access a larger loan, or arrange to repay the loan over a longer time. Bear in mind that while repaying over a longer period can make your monthly repayments smaller, it can also mean you end up paying more in interest.
Get a quote for a debt consolidation loan here.
What about unsecured debt consolidation loans?
As you wouldn't be securing the loan against any of your assets, you may find that the maximum loan amount you are offered is smaller. You might not be able to repay the loan over as long a period of time and you might only be able to access loans with higher interest rates.
It may, however, be a 'safer' option - as you wouldn't risk losing your home (or car) if you fall behind in your repayments. Bear in mind that you would still face consequences if you didn't keep up with unsecured loan repayments.
Did you know that there are other ways to consolidate debts? Click here for more details.
Can debt consolidation help me?
Taking out a debt consolidation loan involves taking out a loan that's large enough to cover the debts you want to consolidate. By paying off these debts all at once, you could simplify the repayment process. You'd replace several monthly repayments with just one monthly payment with a single (perhaps lower) interest rate. You would still end up repaying your debt in full - and you'd face consequences if you failed to repay (especially if you opt for a secured consolidation loan).
Whether you want a secured or unsecured debt consolidation loan, it would only be suitable if you're still managing your monthly debt repayments. If you're really struggling to repay your unsecured debts, there are solutions available that could help you. Have a look at them here, or fill out our debt solution finder to find out which one could be right for you.
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Tags: debt, debt consolidation, debt consolidation calculator, unsecured debt, secured debt, mortgages, repossessions