During a credit crunch, many people will experience difficulties in obtaining credit. However, lenders may be more willing to offer loans to people who are prepared to use some of the equity in their property as collateral - as long as they can afford the repayments.

So, if you are a homeowner, and you want to consolidate your debts with a debt consolidation loan, then choosing to secure it against your property is certainly something to consider.

Advantages of secured debt consolidation loans

Firstly, secured debt consolidation loans usually come with a lower interest rate than unsecured debt consolidation loans. This is because lenders are taking fewer risks with their money when you offer some of your equity as a guarantee that you will repay the loan.

In addition, you may actually be able to get a larger loan amount than you would be able to with an unsecured loan. The maximum value of the loan could be influenced by a number of factors: the amount of equity you have in your property and your ability to make the repayments, among other things.

Another advantage of secured debt consolidation loans is that you may be able to arrange to make your repayments over a longer timeframe than you would be able to with an unsecured loan. However, it is important to note that by repaying any debt more slowly, you may pay more overall - due to interest.

Disadvantages of secured debt consolidation loans

If you fail to maintain the repayments to your secured debt consolidation loan, you may be risking serious consequences: your home may be repossessed. Repossession is, in most cases, seen as a last resort - but you should still think carefully before securing any debt against your property.

Another drawback of securing any loan against your property is that you’re using a portion of your equity. If and when you come to look for a new mortgage, this can be an issue, as having more equity in your property can make it easier to secure a remortgage - and give you access to cheaper deals.

To find out if a secured debt consolidation loan could be right for you, you should contact a professional debt adviser. They should be able to discuss your situation with you, helping you work out if you could afford the repayments (taking into account any changes that may occur in the future), or whether you may be better off looking into an alternative debt solution.

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