Two types of debt
consolidation loans are home-equity lending, also known as a secured loan, and
personal lending, or unsecured loans.
Home equity loans are
granted to clients so they can consolidate their debts. Your monthly payments
will usually have an interest rate between 9-12%, quite a good option for those
who have just been recently divorced, or have experienced a major pay cut at
work. However, it being a home equity loan means you would have to put your
house up as collateral. Should you fail to pay your loan, your house will be
sequestered by the lender.
Meanwhile, personal lending
loans generally have higher interest rates than home equity loans, ranging from
12-15%, simply because you do not risk any of your properties as collateral.
This means that the lender’s money is at a higher risk, and he needs to recoup
his investments should you fail to pay, hence, interest rates are higher.
