An Introduction to Secured Debt ServicesPosted by Anisa on Sep 20, 2010 in Debt Service, Secure Debt | 0 comments
Tight economic times have caused strain on all but the most robust purse strings. Many US citizens are currently experiencing cash flow difficulties caused, for example, as a result of redundancies within a household or even due to pay increase freezes which, coupled with rising costs, have the net effect of reducing overall wealth. One effective way to tackle these problems is through debt consolidation (sometimes alternatively referred to as secured debt consolidation or secured debt relief).
Secured debt consolidation will only be a viable solution to financial concerns suffered by borrowers who own real estate. This is because, by definition, any loan which is granted will be secured against equity contained in a real estate property. In this case, the amount which is possible to borrow is likely to be limited only by the amount of equity which is held in the real estate. Secured debt consolidation can be used effectively, for example, where a borrower has a number of high interest loans (usually unsecured debts) and paid off using this low interest secured loan. Because the loan is secured, it will give the lender more reassurance that the debt can be repaid and so a more favorable interest rate will be offered.
Equity in a property can crudely be calculated by subtracting the amount of money owed on real estate loans from the current value of the property. The latter amount will usually be calculated by a trusted property appraiser from the lender and is of course the closest estimate they can receive. Estimates will generally gear slightly on the side of caution. The main reason for this is that this is the best way to ensure the borrower is not overstretched and so protects the position of the secured debt lender. Another reason is that any estimate which has been inflated to an unrealistically high level in order to obtain additional borrowings could be the subject of a fraud investigation.
Since the lender will take security over the real estate property, this will restrict the ways in which the homeowner is able to deal with their piece of real estate until the loan is repaid and the security is released. The practical implications of this might not be especially great if the real estate is already encumbered with a previous secured loan. In practice, full settlement is often arranged through real estate attorneys when the proceeds of the sale will be used to discharge the loan in full. As you would expect, you will receive less of an amount if you borrowed a greater sum against the value of the property. However, the point is that savings will have been made elsewhere, since other borrowings will have been paid off and, as previously mentioned, high interest rates would have been drastically reduced with the consolidated loan.
Secured debt relief can be a prudent and a sensible way of restructuring your finances to reduce your interest rate. With a lower interest rate on your consolidated debt your monthly payments go more towards the capital amount than with the initial high interest unsecured loan, whilst, simultaneously creating a better cash flow if completed diligently. One should also consider though, that considering a consolidated loan will have greater consequences if defaulted on than when defaulting on an unsecured loan. If your future looks financially stable and secure then it may be an option to look into, but if you are uncertain of your future financial outcome then it is not wise to secure your debt into a consolidated loan.
By speaking to a debt analyst at Personal Credit Solution, you will get unbiased and knowledgeable advice regarding each of the debt management programs available to you. Their satisfaction guarantee and NO-Upfront Fee promise ensures you will be taken care of on your path to financial freedom. Explore your options today by calling us at 1-888-727-4505 to receive your free consultation – the first step on your path to a debt free life.