Secured debt is any loan which is secured by a collateral. A collateral is any asset which can be of value to the lender, should the debtor fail to repay. Car and mortgage loans are typical examples of secured debts. Although, secured loans often offer lower interest rates than unsecured loans, there is a risk of losing your asset if you fall behind on payments. Naturally, people who are indebted by a secured loan look out for other options, if they find it hard to arrange for the payments.
How to Get Secured Debt Relief
Debt elimination is not possible until you repay the full loan amount. Nonetheless, there are some ways, in which you can reduce the debt amount to be paid. Consolidation is one way in which you can get a waiver on your debt. This primarily includes negotiating with the lender to allow you to pay the highest affordable repayment amount and get a waiver on the remainder. You can either seek the services of debt consolidation firms to negotiate with the lenders on your behalf, or you can conduct the negotiations yourself. It is more easy to eliminate unsecured debt with consolidation than it is for a secured debt. The reason is, since no collateral is involved in unsecured loan, the lender agrees for debt relief by allowing the debtor to repay whatever he can afford to pay. In this case, the lender hopes to retrieve as much debt amount as possible.
However, in case of a secured debt, the amount of risk for the lender is greatly reduced, as he can repossess the collateral if the debtor fails to repay. Hence, he might be unwilling for any negotiations with the debtor. However, if you only demand a small debt reduction on your impending debt, then your pleas are likely to be heard.
Secured Debt Consolidation Loan
Consolidation loan is another good option to get out of a secured debt. It is particularly helpful if you have multiple secured loans with different private lenders. In that case, you can consolidate all your small loans into a single loan. This alleviates the hassles of dealing with several lenders. Besides, the interest rate on a consolidated loan is often less than what you would be collectively paying on several loans of smaller amounts. A secured debt consolidation loan offers you a lower interest rate than the average interest rate of your multiple separate loans. Lenders will often ask for a collateral in terms of real estate or house. Some may even accept bonds, stocks, expensive jewelry, or even electronic goods. Although, it is true that the interest rates of such loans is lower than unsecured debt consolidation loans, their payment period is often stretched over years. This means, in the end you will end up paying lot more than your higher interest individual loans. Nonetheless, this is still a good option to combat your immediate financial problems and get a relief from the nagging creditors.
Another way of reducing your secured debt is by making principal-only payments. In case you become a beneficiary of a large sum of money in the form of payroll bonus or a tax return, you can use the money to pay down your principal amount. This will reduce the balance fast, thereby costing you less in terms of interest.
The best way to get a debt relief on a secured debt is to manage your finances properly, and diligently pay the monthly payments.