A Secured Consolidation Loan is when you put up an asset in order to get a loan to pay off your other debts. This is most commonly seen when people use the equity in their home as the asset. This is what’s referred to as either a second mortgage or a home equity loan. Home equity loans can either be a revolving line of credit or a one time, closed end loan. Revolving credit lets you choose when and how often to borrow against the equity in your home.

If you have enough equity in your home, a decent credit score, and enough income, this can be a great option for you. You will most likely get a lower interest rate than the one on your current loan(s) and that interest can potentially be deductible, which is a great benefit to you. This type of loan will cause your mortgage payments to increase, but will usually lower your total monthly payments compared to not consolidating and paying each of your other loan(s) individually, in addition to your mortgage.

One of the drawbacks of a secured loan is that you are trading an unsecured debt for a secured one. If you are struggling, even slightly, we would not recommend this option because if you miss any payments you could lose your home due to a foreclosure. This type of loan will typically take a long time to pay off, but that’s the trade off you will have to make to get a secured loan and a lower tax deductible interest rate.

Lenders look at many factors when determining the qualifications for a secured loan. They look at your credit score, debt-to-income ratio, loan-to-value ratio, the amount of equity in the home, along with a host of other factors. In order to combine all of your smaller credit card debts into one larger debt by using your house as collateral, it requires you to have equity in your home.

We can refer you to one of our affiliates that offer equity loans and refinancing options. If you believe that this is an option that may be right for you, please give us a call and we will see if you qualify for an equity loan or a refinance.

At S.J. Packman & Associates, before we make any recommendations, our attorneys, certified debt specialists, and paralegals, are trained to ask the right questions to find out about your specific situation. Based on your current income and your financial hardship, we will determine which course of action will work best for you. We do not only offer one path, as there is no one process that can solve everyone’s needs. We will take our time with you and help evaluate what your best course of action should be. Call now and one of our advisors will be there to get you started on your path to financial freedom. There is no obligation to enroll, so don’t delay.