Types of Loans & Credit

Consolidation Loan:

A consolidation loan should pay off all of your existing unsecured debts. This would be loans from credit cards, retail store cards, bank overdrafts and personal loans.

Essentially, a consolidation loan combines all of your unsecured loans and uses your home equity to secure them.

But be careful of what looks to be a quick fix, you’re getting symptomatic relief, not a credit cure. Home equity lines or loans appear as a quick and easy way to get out of debt. By leveraging your primary residence value, you get money to pay off other bills and a tax break, too. But borrowing against your house can backfire. The biggest risk: You could lose your home if you default on the loan.

Re-Mortgage:

Many times, the answer to a credit crunch is to re mortgage your existing home. Housing prices have increased in the past few years and the opportunity to take some of that equity out of your home.

When you remortgage you move your mortgage from your existing home loan to another loan, paying off the old debt with the new one. You may not even change lender. There are two basic reasons to remortgage: you remortgage to save money with a better rate of interest or you remortgage to borrow more money against the value of your property.

Please remember that as with any mortgage your home may be repossessed if you do not keep up the repayments.

Secured Loan:

A secured loan is a loan that uses your home as security against the loan. Secured loans are suitable for when you are trying to raise a large amount; are having difficulty getting an unsecured loan; or, have a poor credit history.

Benefits of secured loans include:

• The ability to borrow more money
• Lower monthly repayments than unsecured loans
• Spread repayments over a longer period of time

Be on the look out for the following:

• High interest rates
• Penalty charges for defaults or early repayment
• High set up fees

With any type of loan, credit or refinancing, you should always seek professional advise!