Most people have a habit of buying things in credit using their credit card. If you are one of them, then it is likely that you have a mounting amount of credit card debt to your name. Credit card debts are unsecured debts which usually have a high interest rate.
When you have debts with high interest rate then it becomes more difficult to pay them off as most of your money is gone in making the payments on the interest rate and the principal amount remains as it is or reducing just slightly. In such cases it is advisable that you take out a secured personal loan to pay off your unsecured loans. Read on to know ideas about personal loans.
What are secured loans?
Secured loans are loans that are secured against any collateral. Most often your house is such collateral. You can take out a second mortgage by keeping your house as collateral. The best part of unsecured loans is that they have a low interest rate. This is because, since the lender has a guarantee that he will get back something in return if you default on the loan, in the case of second mortgage your house, hence they charge lower amount of interest.
Why take a second mortgage?
A second mortgage loan, also known as home equity loan (HEL) keeps your house as a guarantee and allows you to take out a loan. This loan is given to you at a lower rate of interest as compared to secured loans. You also are entitled to get tax benefits on these secured loans which is not available to you in case of unsecured loans. However, a word of caution needs to be given here. Don’t take out a second mortgage unless it is really important for you to do so. Even when you have taken out a HEL, see to it that you are able to pay back the loan as fast as possible. This is because if you default on the loan, your house will go into foreclosure.
Thus you can see secured loans are an excellent way to pay off unsecured loans although these should be paid back as soon as possible.
Examine first your loan eligibility criterion from individual banks, which varies from bank to bank and select the one which would offer maximum amount of loan depending upon your income data and credit history. More info on home loan
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