Most people acknowledge and accept the inevitability of debt. From credit cards to personal loans to mortgages to overdrafts, we all take on certain debts to sustain our lifestyles.
But when the credit facilities we use and the debts we take home get out of hand, they can have an adverse effect on our lives. Not just in a financial sense, as psychological and even physical health can take a hit when debt becomes problematic.
The trouble is anything that gives an individual the opportunity to “buy now and pay later” can be difficult to resist. This counts double for those who may be facing temporary financial difficulties, yet would prefer to sustain the lifestyles they have come to know.
It can be surprisingly simple for debt to get out of hand, often triggering a self-perpetuating debt spiral. The issue is that many people who find themselves struggling with debt do not realise they are in trouble until things have already begun spiralling out of control.
The Harmful Effects of Excessive Debt
Of course, the most immediate issue that accompanies excessive debt is finding yourself with costs that exceed your level of income. Over time, those seemingly modest credit card and loan payments gradually add up and your disposable income dries up. Once you find yourself in a position where you are not earning enough to cover your debts, you face the prospect of legal action, or repossession of your assets (perhaps even your home).
Excessive debt (even when managed fairly sensibly) can also have an adverse effect on your credit score. The simple fact of the matter is that lenders do not like to see evidence of excessive and unnecessary borrowing, as it may indicate a lack of forethought and/or self-control.
When debt gets out of hand and you find yourself facing major financial difficulties, you inevitably feel stressed, anxious, and afraid; something that can quickly lead to depression and adversely affect a person’s psychological and physical health.
Sadly, debt is something that seems to creep up out of nowhere and hit people hard at the worst possible times. But there are effective and affordable ways to get out of debt, by eliminating some (or even all) of any outgoings that may be causing you trouble.
Secured Loans for Debt Consolidation
If you own your own home, chances are you would be able to qualify for an affordable homeowner loan. This is a specialist type of secured loan, which to a degree works in a similar way to a mortgage.
You borrow against the amount of equity you have in your home and you gradually repay the balance over a series of monthly instalments. With a homeowner loan, you can repay as many of your existing debts as can be covered by the size of the loan you take out, replacing them with one single monthly repayment.
This is not just about simplifying debt, but also reducing it. Secured homeowners loans typically carry much lower interest rates than most comparable loans and credit facilities. You may be offered a homeowner loan starting from less than 3% APR, whereas a typical credit card may carry an APR of 15% or even 20%.
The more of the smaller debts you repay with a secured loan, the more you stand to save on a monthly and annual basis. As an added bonus, a secured homeowner loan will not harm your credit report in the same way as a standard consolidation loan.
Consult with a broker if you believe you could benefit from this form of debt consolidation, and to discuss how much you stand to save.