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By Zulika van Heerden

 

When it comes to debt consolidation most people do not know how to choose between unsecured and secured loan options

 

Unsecured loans are some of the most available ways to consolidate your debts because, as the name suggests, they don’t really need you to put anything on the line. Thus credit cards and similar loan consolidation arrangements have become very common in recent years.

 

However, one big problem with using unsecured loans to consolidate debt was that they usually had high interest rates attached to them. With credit cards, for example, that interest could reach as high as 35%. If that sort of figure is too much for your income and budget, you might want to try one of the other very available methods of debt consolidation – the mortgage.

 

Your Debts under One Roof

 

A mortgage bond is, in essence, a loan with your home or real estate used as collateral or security. Therefore, it offers all the usual benefits of debt consolidation plans, such as simplified payments and an extension on what would otherwise have been overdue and interest-heavy debts.

 

The added advantage of getting a mortgage to consolidate your debts is that the interest rates associated with mortgages are usually lower. Sure, it’s been getting a bit more expensive in recent years as all the borrowing and other market forces have pushed the interest rates upward.

 

Nevertheless, getting a mortgage to put all your debts in one place is still a cheaper option than unsecured debt consolidation methods such as using credit cards. You can take comfort in the fact that you won’t be forced to pay the sky-high 25% variable rate that some credit cards tend to charge.

 

 

The Cons of a Mortgage

 

Because it’s a loan that’s secured using your house, the most apparent and the most urgent drawback of getting a mortgage is that your house and real estate is on the line. Before taking out a mortgage loan, you have to make sure that you’ll be able to make mortgage payments regularly and on time to keep your house yours. There are also closing fees that you’ll most probably have to deal with at the end of the loan term.

 

Mortgages are a great option to consolidate debt for those who have assured regular income for the span of the loan term, as well as considerable home equity. It offers considerably lower interest rates than other non-secured loans and consolidation methods, so you’ll be paying less in fees throughout the term of the loan. And when it comes to consolidating debt, saving money is what counts.

For more on debt related articles click on any of the links below:

Debt Consolidation Advantages
Debt -  Free Living
Lowering Your Debt For Life
Are your debts keeping  you awake at night?
Good Debt vs Bad Debt


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