Increase the value of life
There are two types of debt consolidation loans: secured and unsecured. Let’s look at the pros and cons of each.
When you take out a secured loan, you put something of value as collateral. For example, if your grandmother left you a single gold bar worth $6,000, you could use that bar as collateral. Typically, banks lend money based on a loan-to-value (LTV) ratio. If the lender you work with uses an LTV of 80%, that means the maximum they will lend against collateral worth $6,000 is $4,800 ($6,000 x 0.80 = 4,800 $).
You can, however, use anything of value as collateral. Maybe you own land, valuable artwork, or a classic car that you’ve spent years restoring. Once the collateral has been appraised to determine its value, the lender will issue the loan based on the LTV.
The most common type of consolidation loan is unsecured debt. An unsecured loan is secured by your signature and your promise to repay the loan in full. Approval is based on your credit score and how you’ve managed debt in the past.
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