There are many people in today’s scenario who are struggling with debts due to several reasons. Getting a loan is only a temporary solution for your financial problems. However, in order to find a permanent solution for your financial problems, you need to spend some time and effort and plan your daily life properly. Usually people take loans without ascertaining their ability to repay them and as result become defaulters. This causes their credit ratings to fall drastically. This kind of financial injury is difficult to cure, but there are several ways that it can be done. One of the methods to improve a low credit score is secured loans.
There are many different types of loans available for different borrowers. The two main types are secured and unsecured loans. The secured loans have collateral attached to them whereas unsecured loans are without the need of collateral. Both these types of loans satisfy different kinds of requirements and both have their own pros and cons.
Getting rid of credit card debts
If you have huge debts – especially credit card debts – and you are unable to repay them, the chances are that your credit score is very poor. At the same time the credit card interest rates are usually very high. In this situation it will be a good idea to consolidate various high interest rate loans with one low interest loan. If you own a property then it becomes easy for you to get a secured loan by offering your property as collateral.
Secured loans are also known as home owner loans. This type of loan will help you to get the required money even if you have a low credit score. Apart from low interest rates, the other benefit of secured home loans is that you can get an amount three times larger than what you would get as unsecured loan. For this loan you will be required to pledge your property or some other valuable belongings as collateral. The loan amount will be equivalent to the value of the property or other belongings.
- Secured loans are long term loans and are usually given for a period of 5-10 years.
- If requested they can be extended up to 20 years also
- It is easier to get these loans approved than it is to get unsecured loans.
- The interest rate of these loans is low compared to that of unsecured loans
A secured loan can help you in easing your financial difficulties because it has a low interest rate and as a result the monthly installments will also be affordable. However, before opting for this type of loan, you should be careful to calculate your repayment ability. This is because if you are unable to repay this loan, the lender has the right to foreclose your property or other valuable belongings. Hence if you are not careful, you may end up losing your property.
However, if you calculate properly and plan wisely, then you can make good use of a secured loan.