For this post, we’ve teamed up with our partners at Fairstone
If you own your home, you have the option to secure your loan with home equity. Although people may be hesitant to use a secured loan or a home equity loan to pay down debt, there are several reasons why it may be your best option.
Our partners at Fairstone shared three main situations when they recommend a secured loan for consolidating debt:
1. You have high debt balances
Simplifying your payment schedule is a good first step when it comes to paying down debt. A debt consolidation loan can be used to pay off all of your outstanding bills, leaving you with a single loan and one manageable loan payment. If you have very high credit card or loan balances, you may need to tap into home equity through a secured loan to access more money and pay off those bills.
At Fairstone, unsecured loans go up to $25,000, but homeowners can back their loan with home equity to access up to $35,000.
2. You’re looking to reduce the amount of interest you pay
When you choose to secure your loan with home equity, your lender gains confidence that you will pay the loan back and make on-time payments. As a result, secured loans offer the best value for homeowners when it comes to interest rates. A lower interest rate can help you pay down debt faster and makes payments more budget-friendly.
Additionally, if you have a history of missed payments, you may have limited access to different types of credit and loans. Lenders may also offer you a higher interest rate if your payment history indicates you’re a riskier borrower. If this is the case, a secured loan can help you access the lowest rate available to you.
3. You’re looking for your lowest payment option
Debt repayment can put a dent in your budget. If you’re looking to reduce your payment amount and give your budget flexibility, a secured personal loan may be the answer.
A secured loan lowers your loan payment in two ways:
- A lower interest rate will lower the amount of money you pay back over the course of your loan
- A longer loan term can spread your loan payments over a longer period of time
With Fairstone, you could take up to 120 months (10 years) to pay back a secured loan. The longer your loan term, the more affordable your loan payments will be. Just be aware that the longer your loan term, the more interest you’ll pay over the course of your loan.
Interested in finding out how a secured loan can impact your loan payments?
Use Fairstone’s interactive loan payment calculator to find out how loan type affects loan payments. Enter the amount of money you want to borrow, choose your payment frequency and toggle back and forth between loan types for a payment estimate.
Are you ready to take the next step towards paying down debt? Go to Fairstone.ca to get a loan quote and to find out how much money you could qualify for and what your payments might be. No obligation and no impact to your credit score. Connect with a Lending Specialist and let them know you’re interested in a secured loan so they can update your quote with the best payment and rate for you.
