Secured Debt Consolidation Loans: Getting Out of Debt Step-by-Step

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It is a fact that many Canadians struggle with their finances and want help and guidance to manage money smartly. In addition, statistics say that Canadians are not very hopeful about their future finances as well. In CPA Canada 2018 Canadian Finance Study, about 45 percent respondents admitted that their financial situation would remain unchanged in the next 12 months.

If you are among such Canadians, you don’t need to worry. Here, we will tell you about the secured debt consolidation strategy that will ease your financial troubles. If you read this guide carefully, you will realize that secured debt consolidation loans are really worth it for most people.

What is Debt Consolidation?

Before you learn more about secured debt consolidation, you should understand what debt consolidation is. In simple terms, it is a loan in which a lender allows you to repay loans to different creditors in one go. It allows you to have one debt left, which is offered by the lender.

This loan usually has some add-on features like lower interest rate or shorter repayment duration. The former helps in saving money, while the latter helps you to be loan free faster. Also, you need to offer an asset as a collateral to get the loan from the lender. The asset can be anything from your home to a vehicle or any other personal valuable.

5 Key Facts About Secured Debt Consolidation Loans

Before you opt for secured debt consolidation loans, you should know 5 facts about these loans. It will help you make a better decision.

  • Secured debt consolidation loans won’t erase your debt, but it can make paying loans easier. You have to make one monthly payment instead of multiple ones.
  • When you opt for secured debt consolidation loans, you will need to work with a new lender. So, you need to understand the terms & conditions of that lender.
  • Many secured debt consolidation programs involve a fee. You may have to pay a fee for financial advice or even transfer of loans.
  • The lender has the liberty to sell off your assets when you can’t repay a loan. This risk may make some borrowers seeking secured debt consolidation programs feel uncomfortable.
  • Your credit history matters when it comes to choosing secured debt consolidation programs. People who are seeking secured debt consolidation loans bad credit will have fewer choices when compared with people who have a good credit score.

Advantages and Disadvantages of Debt Consolidation

Advantages

  • The biggest advantage of debt consolidation loans is that you can easily lower the interest rate if you choose the right lender.
  • People seeking secured debt consolidation loans bad credit can easily find lenders if they offer collateral like real estate or vehicle.
  • If you want to improve your credit rating, secured debt consolidation loans bad credit could be a good option because you will make every payment on time.
  • You save time and energy by making one loan repayment in a month, rather than a few.
  • You also pay off the debt faster as most debt consolidation loans usually need to be paid off in about five years or less.

Disadvantages

  • Secured consolidation loans need to be paid via hard work and dedication. You can’t avoid the repayments.
  • Even after you have chosen a good one among secured consolidation loans, you may have access to a credit card. It may tempt you to get more loan and undermine your financial stability.
  • If you select a secured consolidation loan with a co-signer, the person who signed up as a co-signer may need to pay off your debt.
  • You may also feel the pressure of working extra hard and earning extra to ensure that you pay the loan in time. Not doing so may result in penalties or loss of assets.

Debt Consolidation and Debt Settlement Comparison

When you are looking for secured loans for debt consolidation, you might come across the option of debt settlement. It is an option available to borrowers in which the borrowers can pay off some of the debt (s) they owe to reduce the total loan repayments that need to be paid.

This is a good option for people who got money suddenly, like they sold off an asset or got a bonus at work. But debt settlement is usually not preferred over secured loans for debt consolidation, as it can negatively impact your credit score.

If you opt for debt settlement rather than secured loans for debt consolidation, you will not be following with the original terms and conditions of the debt you took earlier. Hence, you will harm your credit score. A solution to this could be choosing an option that involves comprehensive financial rehabilitation and credit rebuilding program.

How to Choose a Reliable Lender?

The process of choosing the right lender for secured consolidation loans bad credit doesn’t have to be tedious. You should consider visiting a useful website like loansgeeks.com. Here, you can know about top lenders for secured consolidation loans bad credit based on your situation by providing only the basic information. It will help you save time and let you make a decision quickly.

You can also save time and make a quicker decision regarding secured consolidation loans bad credit by trusting one of the following lenders.

NameInterest RateLoan AmountLoan TermWebsite
5.9% to 45.9% (Varies by province)$2,000 to $35,0002 to 5 yearsVisit Website
19.99-33.99%$500 - $30,0006–120 monthsVisit Website
5.99% - 29.19%$1,000 to $35,0003 or 5 yearsVisit Website
12.99% – 39.99% $500-$10000Up to 3 yearsVisit Website
35.99%Contact the LenderContact the LenderVisit Website

Mogo

Mogo provides you with access to a wide range of products for your financial needs. You can sign up for a free MogoAccount in just 3 minutes and it won’t impact your credit score. This lender offers flexible terms of debt consolidation loans as well as they have a secure bank-level system of data storage. Mogo claims that all loans can be paid off in full at any time without any additional penalties.

Fairstone

This lender is able to provide you with a loan anywhere from $500 to $30,000. The quick and easy online application process is one of the advantages provided by Fairstone – you can get a loan in three simple steps. First, you need to get an instant quote from the lender, which will not affect your credit score. Then, you will receive an email from Fairstone’s representative and you can get ready to receive your money.

Borrowell

Borrowell is one of the most reliable lenders in Canadian loan space. It provides personal loans of up to $35,000 with an APR starting at 5,99%. Some of the highlights of this lender include quick and easy application process online, speed of its services, and low interest rates.

SkyCap Financial

SkyCap Financial offers you a loan after completing a fast and easy application process. You can get a loan of up to $10,000, with an affordable payment structure. You can pay off multiple loans with their debt consolidation loan and reduce the number of payments to one low amount.

Credit Canada

Credit Canada has been present on the market for more than 50 years. It helped millions of Canadians overcome debt problems and advance their personal financial situations. According to the statistics on their website, more than 2 million people have improved their personal money management skills, and they’ve resolved $350,057,597 of people’s debt.

Types of Secured Debt Consolidation Loans

When you are seeking secured loans, it is essential to offer a collateral in order to ensure that you get the loan. A collateral acts as security cushion for the lender because the lender can sell off the collateral in case you don’t pay secured loans back.

A collateral also gives you more power when you are negotiating the terms of secured loans. You can easily negotiate better payment terms or lower interest rates on secured loans when your collateral is worthy. To know what types of secured debt consolidation loans you can avail and what kind of collateral is needed for it, just keep scrolling.

Real Estate as a Collateral

When you want secured debt consolidation, you can offer your home or any other real estate as a collateral. As a home is a necessity for people, this is a high-risk loan option. You can either opt for home equity loans or cash-out refinancing.

In the former, you use the equity of your home to get a loan and then use the cash offered to you by the lender to pay off debt. Home equity is the value of your home that you own by paying towards the mortgage.

In the latter option, you replace your first mortgage with a second one that’s completely new and usually larger. For instance, when you want to liquidate $30k of the equity in case, the $30k will be added to the existing mortgage balance as a new loan.

Vehicles as a Collateral

You also have the option of cash out financing if you own a vehicle. In such a scenario, you can refinance a new loan easily. For instance, if the cost of your car is $10000 and you owe $9000 but you want $1000 for paying off previous debts, you can refinance a new loan of $10,000 and get $1000 in cash.

Refinancing is available at a lower interest rate to people who have improved their credit score since the time they took their first loan. This option is also suitable for people who have a high interest debt but want to pay it off to avoid high interest rates in the future. Only people with a fair, good or excellent credit score can choose this option.

Car title loans can be considered similar to payday loans. In these loans, you get money without a credit check. Instead of that, you need to pay high APRs or interest rates. This is also a high-risk option for people who want secured debt consolidation. Data states that between 120,000 and 220,000 people who opt for car title loans end up losing their cars to title loan repossession annually.

Personal Valuables as a Collateral

If you want secured debt consolidation, you can also offer a personal valuable as a collateral.  The process is known as pawning. A term we have all heard thanks to reality TV. In it, you trade items that hold value like jewelry or art for cash. The biggest benefit of this option is that you get cash instantly. You can then use the cash to pay off a debt or to get the best secured debt consolidation option.

When people don’t have a home or a vehicle to offer as collateral, or they don’t want to risk losing it, they offer personal valuables as collateral for secured debt consolidation.

Retirement Savings as a Collateral

Many people don’t have a home, vehicle or a personal valuable to offer as collateral for getting a secured loan to pay off debt. If you are among them, you can borrow money from your retirement fund. You can even share documents regarding your retirement income source with the lender offering secured loan to pay off debt.

As money in retirement funds usually grows with time, an honest lender offering secured loan to pay off debt won’t mind retirement savings as collateral. Some people also choose to stop contributing to retirement funds to pay off a debt. Most financial experts do not advise it. You might threaten your financial future in an attempt to secure the present.

This option is best for people who have deep high-interest debt. Before choosing this option, you must consider the debt to income ratio.

Final Words

In essence, it can be seen that secured loans or secured debt consolidation loans are a good choice for people who have multiple loans and need instant relief.

These loans are also easily available and give more power to the customer as compared to unsecured debt consolidation loans. When choosing such a loan, talk to a financial expert to understand the risks associated with the same and decide whether the secured debt consolidation loans are worth it or not.

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