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Remortgage or Secured Loan: Which Is Better?

June 06, 2012 | Comments: 0 | Views: 128

A lot of people who have debt issues look at using the equity that they have in their house as a way to address the problem. This is a good option since it will almost always get you a better interest rate than you are paying on your outstanding debt, particularly if it is credit card debt. If you are going to use the Equity in your home you basically have two options, you can remortgage your property or you can get a secured loan. The question then becomes which one should you choose?

In general if you have the option you will be better off going with a remortgage rather than a secured loan. The main reason is that it will keep the amount that you have to pay each month down. If you get a secured loan you will have to pay that as well as keep paying your mortgage each month. For a lot of people this can be a real problem, after all if they had the money to make the payments they likely wouldn't have a debt problem in the first place.

The downside to a remortgage is that you increase the length of time that you will be in debt. In most cases you will end up starting over again with a thirty year mortgage. This is clearly an issue if you have been making payments for ten or fifteen years on your mortgage. A secured loan can seem more appealing because it will usually only be for five years and it will not extend the length of your mortgage. If you can afford to make the payments on both a secured loan and your mortgage this may be worth considering, however you do have to be careful.

The big thing that you have to worry about if you are looking at a secured loan is the high interest rates that they sometimes charge. While not nearly as high as the rates your credit cards will charge they are still far from cheap. The other thing to be very wary about is that a lot of the companies that offer secured loans are very predatory, they are just waiting for you to miss a payment so that they can take your home. Companies that offer remortgages are generally much more forgiving of late payments.

It is pretty clear that you are better off with a remortgage than a secured loan in the vast majority of cases. This does however raise the question of just why so many people choose a secured loan. The answer is that they can't get a remortgage or at least they think that they can't. It is true that it is much easier to get a remortgage if you have good credit, something that most people who have debt issues don't have. However if you look around hard enough you should be able to find a company that is willing to offer you an adverse credit remortgage. Your best bet for finding these companies is to work with a remortgage broker who specializes in helping people with bad credit.

There are times when it makes sense to remortgage your home, provided of course that you can get the best remortgage deal possible.

Source: EzineArticles
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