Difference between unsecured and secured loans - The Bills.com Blog

Bills.com Blog > Loans Questions > Loan to pay off credit cards

Difference between unsecured and secured loans

Question: I am considering taking out a loan to pay off a credit card and to do some repair work on my home which I own free and clear. What kind of loan would I need?

Answer: You have two options for your loan needs: unsecured and secured (typically a mortgage) loans. It is technically possible to get an unsecured consolidation loan to pay off all of the debtsyou listed, but if you have no collateral, such as a home, the interest rate would probably approach that of your credit card.

With an unsecured note, the lender is taking much more risk, as they have few ways to recoup their losses in case of default. The result is a higher interest rate, charged because the lender is taking more risk by lending you the money. However, there are unsecured consolidation loans available, depending on your credit score, so I encourage you speak with lenders to find out what they can offer. The Bills.com Savings Center is a good place to start.

Most typically, it is the home mortgage

rate with your home as collateral that makes consolidation loans advantageous to consumers saddled with credit card debt and other expensive debt. With a secured note such as a mortgage or a guaranteed note such as a student loan, the lender's risk is lowered significantly, so a consumer friendly interest rate is usually available.

As you own a home, I'd recommend applying for a secured home equity line of credit. A Home Equity Line of Credit (HELOC) is a great way for many homeowners to tap into the equity in their homes, allowing them to pay off high interest credit card debt, to finance large purchases, or, as

in your case, pay for home improvements which should further increase the value of your home. To read more about home equity lines of credit, I encourage you to visit the Bills.com website at http://www.bills.com/home-equity-line/. If you enter your contact information in the Bills.com Savings Center at the top of the page, we can have several pre-screened lenders contact you to discuss the options available to you.

I hope this information helps you Find. Learn. Save!

Best,
Bill
www.bills.com

Also, make sure to get a free financial health check-up with Bills IQ!

User Comments

1. Posted by tina on Wednesday 2nd January 2008 07:07

hi i want to borrow the money to pay off my credit card/ i have owes to couple credit card company around 6000.00 please help i need to pay off .everymonth i alway have overdraft from my checking account. and my expense cant cover my car payment and bills.

2. Posted by Nathan on Wednesday 2nd January 2008 11:17

If you have a less than good credit score, getting another loan to pay off the debt will be a difficult proposition. Regardless, you should try and apply to see if you qualify for a loan. Bills.com makes it easy to aplly to multiple lenders. Just put in your information at https://www.bills.com/homeloan/debt_consolidation/?state=andzip= If you are going through a financial hardship you should look into a credit counseling program, also know as a Debt Management Plan. In a debt management plan, a knowledgeable counselor will guide you in creating a budget and the company will handle all payments to your creditors usually on a reduced interest rate. This might help in lowering your payments to a certain extent. Bills.com can match you with qualified providers, just fill in your information at https://www.bills.com/debthelp/credit_counseling/

Submit questions/comments about this post:

Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!

Name (required)
Email (required never displayed)
Comments
	Please enter the characters you see in the image above.