What would you do with a loan today?
Have you ever had the need to apply for a loan? What are they talking about when they mention secured loans? Does it have any difference from a regular loan? Let’s investigate.
Secured loans is a type of loan where you put up a collateral or an asset such as your auto or your home as a protection to the loan. Whomever financed the loan will have entitlement to hold the deed or the title of the property and place liens against the purchase in order for them to be assured of the loan’s repayment. Technically, it is one of the easiest loans to obtain approval because it goes beyond your simple words that you will pay the loan. Lenders are less likely to approve a loan without a collateral and therefore putting up your own property as a collateral guarantees the lender that you will do everything in your power to repay the loan.
You may also use bonds or stocks as collateral to secured loans. There are numerous types of loans that could fall under the term ’secured loan’. Loans such as home equity lines of credit, home equity loan or debt consolidation loans could be considered ’secured’ if you use something to put up against the loan such as personal property and the like.
How would you use any of these loans to your advantage? If you are buried in credit card debt and you own a home, obtaining a secured loan could dig you out of the hole of debt madness. It takes a lot of discipline to get out of debt and once you decide, you better make certain that you are in it for the long haul until all debts are paid. It is so easy to fall back into the credit trap so my advise to you is to tap on your equity and clear out your credit card debt. You must remember, these credit card debts are not paid off until you pay off the home equity loan and make it known to yourself that this is the case until it sticks. I have known many friends who thought that once they have paid off the credit card debt, they are debt-free. That is incorrect. Being debt-free is when you have paid off all your ‘debts’ and that includes any and all secured loans you may have taken out. A lot of us will probably have mortgages for a while so you can discount mortgage payments. As long as you’re paying everything in cash (except your mortage), and owe nothing to credit cards – you can say you are debt-free.
It may be wise to take audit of your finances yearly and make sure that your net worth is visible after the crunch. This would inspire you to do better in handling your finances. Once you see that a nest egg is being built after you pay off your credit cards, it may help you control your spending the next time you see a ‘fancy Louis Vuitton bag’ at the mall.
