We generally come across two types of loans. They are secured debt and unsecured loans. Loans like a home mortgage or car finance are secured with your house or your car as collateral. The credit card loans, on the other hand are unsecured debt where the credit amount is not secured by any collateral and the creditor is taking a higher risk by lending you money. You will generally find secured loans charge a lower interest rate than the unsecured loan because of the risk factor. There are many ways of paying off your unsecured loans, especially if you are facing financial problems.
You can try getting a home equity loan or a home equity line of credit. This basically means getting a secured credit with your house as collateral to pay off the unsecured loans. This will help you in two ways. First you can pay off high interest loans with 20 % or more as interest rates by taking a loan which has a much lower rate of interest. Secondly this brings down your monthly payment tremendously. Depending upon the number of accounts that you are paying off with this loan your actual payment each month will be reduced.
You can try consolidating your debts. This can be either a secured or unsecured loan with a lower interest rate than what you are paying now. This will bring down your monthly payments tremendously but the maturity of a consolidation loan is much longer than your original loan hence you will be paying a lot of money over this duration of time.
Settlement of debt can help you negotiate with your creditors and influence them to reduce the loan amount by as much as 50% of the outstanding debt. This method is mainly adopted by those who have a huge amount of unsecured debt.
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