Can I Consolidate My Secured Debt?

One of the main solutions for people who have taken on more debt that they can pay off is to have the debt consolidated by a lender. Many finance companies are willing to buy a person's current loans and issue a larger one. This may increase the size of the person's debt load, but it may allow her some financial breathing room, as the size of her monthly payments may shrink.

Secured Debts

A secured debt is attached to a form of collateral. If the person defaults on the debt, then the lender will be given permission to take possession of the collateral as a means of compensation. Generally, people who are able to secure their debts are provided a lower rate of interest than people with unsecured debts, as the lender faces less risk of not being paid back on the loan.

Debt Consolidation Companies

Debt consolidation companies are finance companies that pay off people's debts in exchange for issuing them new debts. Sometimes this will make financial sense for a person who has difficulty managing payments to multiple companies each month or who is seeking to pay less each month but is willing to extend the overall life of his debts.

Terms

Generally, debt consolidation companies will not require that people secure their debt, although some may ask for a form of collateral. It is not any more difficult for debt consolidation companies to buy secured debt than it is for them to buy unsecured debt. The terms that a company will offer its customers for loans will vary, with some charging extensive fees and high interest rates and others providing the new loan at a relatively low cost.

Considerations

Even if a person is able to find a company willing to consolidate his debt, this may not be a wise financial decision. This is because debt consolidation firms are for-profit companies, meaning that they will be attempting to make money by issuing the client a new debt. Some people who take on consolidated debts are charged fees for the new debt and may see an increase in both size of their debt and the interest attached to it.