Monthly payments, different bills, home improvements, and unexpected costs can all make it hard for a person or family to keep up. Many people who want to survive this financial assault have to take on more and more debt.
But being in debt has a lot of bad things about it. You are spending someone else's money, which you will eventually have to pay back. And debt isn't cheap, either. The interest rates that some companies offer could make your financial situation even worse.
If you are having trouble, you could consolidate your debts or get a secured loan.
Start with banks and credit unions that are well known. Start your research on loan brokers by talking to your current bank or large credit unions. These are reputable institutions, so scamming won't be a problem. You might not get the best rate at a big bank, but the security you get can make up for that.
Be wary of claims that you can quickly get a cheap secured loan. A lot of borrowers are told that their deal will be done by a certain time. In anticipation of the new loan, they don't pay their other bills.
After missing a few payments, they are now in default and can't get any money from the new loan. Then, the loan company orders new credit reports, raises your fees and interest rate because the loan was late because of the company's own mistakes, and sends you a new set of credit reports.
Before you take out a secured loan, here are some things to think about: you need to buy a roof over your head, get health insurance, save enough money for a year off work, pay off any debts you have, and make sure your kids get a good education. After you've done all that, you can play around with what's left. Anything else puts your future in danger.
Before you sign, you need to understand every word of the agreement, including the terms and conditions. This is because a loan may become too expensive if the interest rate changes or if there are other fees.
The annualised percentage rate will determine how much your secured loan will cost you in total (APR). The annualised percentage rate looks at the total amount of interest and all fees.
When you call your company to talk about your loan, make sure you get the person's full name. Large offices don't feel like home, and your loan officer could leave tomorrow.
For someone who thinks "play now, pay later," a secured loan can be the second or third step toward being homeless. Think carefully about why you need the loan and how you will pay it back.
I would only take out a secured loan to:
- I started a business that I had done a lot of research on;
- Spend money on a good education for a bright child;
- A serious health problem;
- To pay off a high-interest loan or credit card.
Getting a loan for anything else, like home improvements, vacations, or a new car, ties you to a good whose value goes down as soon as you buy it.
Don't let yourself be tricked into getting a secured loan to make improvements to the property you already live in. Not all "improvements" increase the value of a property, and even if they did, you can't get that value unless you sell the place.
In the meantime, you'd have to pay back the loan and interest each month, which would cost you hundreds of dollars, and you'd have to cut back on treats or even necessities.
