You may have considered debt consolidation as a possible solution to your debt problems. However, you may not know that there are two different types of consolidation to consider.

The one most often discussed is a secured debt consolidation loan. Usually, the loan is secured by your home equity. Often you will either take out a home equity loan or you will refinance your entire mortgage, secure a larger loan, pay off your first mortgage, and receive the difference between that loan and your home’s value in cash.

However, if your home has not built up enough equity, you don’t want to take out a new mortgage, or you don’t own a home, you may still be able to get the second type of consolidation loan: one that is considered unsecured.

Secured vs Unsecured Consolidation Loans

Unsecured consolidation loans are different because they require no collateral. If the loan is not paid in full, you don’t run the risk of losing any property as a result. With a secured loan, the bank can take your home if payment is not made.

Because the unsecured loans are riskier for the lenders, you will end up paying more in interest rates and may have to pay off the loan in shorter time. That might also mean you’ll face higher payments than you would with a secured consolidation loan.

Another difference is in the amount you can borrow. Secured consolidation loans are rarely issued for less than $10,000. Unsecured consolidation loans, on the other hand, are limited at less than that amount.

Reasons to Choose Unsecured Debt Consolidation Loans

If you’re trying to decide between a secured and an unsecured consolidation loan, then here are some factors to think about:

o Do you have collateral? If the answer is no, then your only option is an unsecured consolidation loan. If the answer is yes, then think about whether or not you want to tie your home to this type of loan.

o How much debt do you owe? Add up all of the debts you want to consolidate. If the amount equals more than $10,000, then you’ll probably need to choose a secured consolidation loan. For lower debt amounts, you can choose either type of loan.

o What are the interest rates on your debt? Remember that an unsecured loan is going to involve higher interest rates than a secured one. If those rates are going to be close to what you are paying on the debt you want to consolidate, then you may want to go with a secured consolidation loan instead.

o Do you need lower payments? If the purpose of consolidation is to make your debt payments more manageable, you may not want to choose an unsecured loan. Because the terms of these loans are usually shorter, you may end up paying significant monthly payments. If you just want to eliminate some high interest debt or make managing your debt easier, then either type will work well for your needs.

Before you choose either type of consolidation loan, make sure to shop around and secure the best loan deal available.

By: Paul Sarwana

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One of the most asked question when it come to debt is “what is the best way to get out of debt?” Well, it definitely have something to do with drafting a bailout plan and stick to it (read: work). Certainly, if there’s anyway you can ‘cover’ high interest rate loans with lower ones, do take the plunge. Even when the amount is not much (considering the bad credit standing you have), you’ll save quite a bit from the switch.

Anyway, the proper way of dealing with debts is to come to terms on how much you actually owe. Ask anyone in debt about the amount they owe and you’ll find that most people rather not think about it. Sadly, that does not change the fact that the debt will continue to snowball unless you DO something. List out all your debts, like this:

Credit card 1: $3550 (37% interest – paying only minimum payment)
Credit card 2: $1720 (37% interest – paying only minimum payment)
Credit card 3: $800 (18% interest – current)
Personal loan: $23,750 (6.9% interest – two months overdue)
Car loan: $18,300 (6.5% interest – current)

Now you have a clearer picture of how much you owe, even though the very thought of it make you cringe. Next, decide how much you have left over every month after deducting basic expenses. It should look like something like this:

Salary: $3500
Rent: $900
Car: $400
Food $600
Petrol $400

So that’s a $1,200 leftover from what you’re making after deducting expenses. You’ll see that with such limited amount in your hand, there has to be a careful selection as to what gets paid first. Obviously, getting out of credit card debt is of the highest priority especially if you can only managed to pay minimum payment (credit card 1 & 2).

You’ll want to renegotiate your personal and car loan deal to stretch over a longer period of time with lower repayment every month to keep up. Assuming, after three months, you have successfully eliminate all the debts in credit card 2, while continue to pay minimum payment on card 1 and barely getting by with the rest of the debt. Here’s two things you need to do. Firstly, don’t start spending on card 2 again, thinking that it’s safe to do so now. Secondly, continue with paying $1,200 towards the next highest interest debt – card 1. Do not reduce the payback amount thinking that you have one less item to pay for. Don’t ever get too comfortable, give yourself a reward, or throw a celebration whatsoever – crawling out of debt takes patience and endurance

Even when you are done paying credit card 1 and 3, continue to pay $1,200 each month towards personal loan and your car loan to be debt-free in the fastest time. Since you are are used to living without the money, you’ll barely miss it. Surely, after you’ve paid your debts, continue to dump in money to accumulate some savings so you’ll never have to be in debt again.

It doesn’t always take a debt consolidation plan to repay debts, provided you have the courage and determination to do so. This plan will work for anyone with overwhelming amount of debt as long as new debts are not accumulated.

By: Steff X

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Good investments are always out there, but investment opportunities are not always easy to find. What’s important is that you find a good investment that fits your particular needs. This can be tricky business because it’s all a matter of trade offs, and most people don’t know investment basics.

A good investment for your friends might not be a good investment for you. For example, you don’t want to place bets on a penny stock in an account earmarked for future college expenses. Penny stocks are not investment opportunities; they are speculation.

Believe it or not, many people follow the lead of a friend when making investment decisions. They want to invest money where Ralph did because, according to Ralph, he made a lot of money in investment opportunities he found. As a financial planner I ran across this time and time again from new clients that were referred to me by existing clients of mine.

Here are the investment basics. You can’t have it all in any one investment. If you want growth (higher returns), you trade off safety. If you want high income or safety, you trade away high growth prospects. If you want the tax breaks offered by a retirement plan, you give up high liquidity (quick and easy access to your money without penalties).

So, when looking for good investments, make sure the investment fits your needs. If your kid starts college in two years, a bear market in stocks could change his or her plans if you had the college fund invested in stocks. If you are saving for a down payment on a house, the same holds true.

Rank your financial needs before you invest in anything. Always consider these five investment basics: liquidity, safety, growth, income, and tax advantages. No investment ranks high in all five categories.

A good investment for you depends on the investment basics that best describe your financial needs and financial position in life. For example, an IRA or 401k plan is great if you want to invest and earmark money for retirement. But you don’t want all of your money tied up in stock funds in a retirement plan. What happens if you need cash fast for an emergency?

Don’t call Ralph’s financial planner and tell him you want what Ralph has. Instead, view every investment in terms of the investment basics. His investment opportunities might not be good investments for you.

By: James Leitz

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