Debt-burdened individuals don’t always have to resolve to bankruptcy as a method of relief. Consolidation is an excellent alternative for making debts more bearable while preserving one’s credit. But your options might be limited by several factors.
Secured or unsecured consolidated loans might seem like an easy choice to make, but it might be more technical than it sounds. Each has specific requirements and legal implications, and Oklahoma City bankruptcy attorneys can break them down for you to aid with your decision-making.
What Differentiates Secured From Unsecured Loans?
If you are ready to put up one of your assets as collateral for your consolidated debt, then you might want to go for the secured loan. However, this could mean that the loan company could come for your home or car if you miss payments.
Secured loans involve:
- Longer approval process
- Value assessment of assets
- Additional proof and documentation
- Higher amounts
On the other hand, unsecured loans need no collateral. But because of the risk associated with it, many lenders put a higher interest. So, while your assets remain secure, you have to pay more in interest. Unsecured loans have the following characteristics:
- Its only security is the strength of your cash flow, creditworthiness, and the promise to repay
- Are often given for smaller amounts of consolidation
- Quicker approval process
How Does Debt Evaluation Help with Decision-Making?
It is important to evaluate your debts before deciding whether to choose unsecured or secured loans for consolidation. Not all your debts are best consolidated. Some secured debts are better not consolidated because most are offered with favorable interest rates, to begin with.
Some of the debts that are best for consolidation include:
- Relatively minor, non-federalized student loans
- Some personal loans
- Some medical bills
- Credit card loans
Depending on the debts on your portfolio, debtors can explore consolidation options such as:
- Student loan consolidation
- Home equity line of credit (HELOC)
- Credit card balance transfer
- Debt consolidation loans
You can access your list of debts by getting a copy of your credit report from a credit bureau. An Oklahoma City debt consolidation attorney can then brief you about the legal aspects of consolidation as a debt relief alternative.
How Can My Monthly Income Determine My Choice?
The monthly repayments for secured loans might not be the same as the amount for unsecured loans. And you want to pick an option that is manageable and won’t land you deeper into more debts. An option that allows you to make monthly payments on time could be the right consolidation choice.
This process begins by gathering your recent paystubs and other unearned or earned income statements. After that, you might want to deduct all the taxes and other expenses deducted from the check. Your “take-home” income can inform your decision on consolidation.
How Does Budgeting Help in Deciding Between Secured Vs. Unsecured Loan?
While your “take-home” income might give you an idea of your disposable income, budgeting can help you arrive at the real figure. You can get a few recent bank and credit card statements to analyze your spending habits for the past several months.
It is critical to take note of irregular, variable, and regular expenses to avoid underestimating the expenses. Once you subtract this amount, you will be sure of the money available to pay a consolidated loan; secured or unsecured. It might be easier to decide on the most appropriate arrangement where you won’t miss a single payment.
What Should I Do if I Have the Financial Muscle for Both Secured and Unsecured Loans?
Budgeting gives an idea of how much you can afford in repayments. But if you can afford to make repayments for both secured and unsecured loans, decision-making might be even more challenging. Here are questions to ask yourself:
- Do I need a consolidation loan that is easier to get?
- Do I have a poor credit history that I’m still struggling to rebuild?
- What interest rates do I desire?
- Do I need higher borrowing limits?
It is generally easier for lending institutions to give loans when collateral is attached to them. And in such a case, the interest rates will be lower. Unsecured loans are also difficult to secure with a poor credit history. Additionally, the amounts given might be relatively low. A debt consolidation attorney in OKC can enhance the quality of your decision-making.
How Does a Credit Score Affect My Viability for Secured and Unsecured Loans?
A debtor’s credit score is a big deal, especially for unsecured consolidated loans. Your creditworthiness can give a lender confidence that you can repay even without collateral to collect in case of a default. Credit scores usually range from 300 to 850.
Here is how scores can be categorized in Oklahoma:
Scores between 670 and the ceiling of 850 are considered exceptional, very good, or good. It might be effortless to get an unsecured loan if your credit score is in this category.
580 to 669
A credit score in this range is deemed fair, and you might have a 50-50 chance of securing an unsecured consolidated loan.
Credit scores between 300 and 579 are generally poor, and lenders might think twice before allowing unsecured loans.
Overall, your credit score determines whether you qualify for secured or unsecured loans. Speak to an Oklahoma City debt consolidation attorney to learn more about your credit score and its impact on your consolidation loan.
Attorneys Determined to Get Your Finances and Life Back
Choosing the wrong debt consolidation loan can worsen your debt situation in Oklahoma. You can end up paying more or with a ridiculously prolonged repayment period. Consolidation should improve your situation and help you get out of debt within a reasonable time.
The debt consolidation attorneys at our law firm can help you pick an alternative that can give you lasting financial relief. We will ensure that you conclusively explore each option before deciding on the best possible alternative. There is no reason not to give us a call today.