Improve Your Credit Score With Homeowner Consolidation Loans

By: Melissa Kellett

Debt Consolidation Loans are usually recommended when someone has debt problems because these loans reduce the amount of money spent on interests, lower the monthly payments making them more affordable, and turn an otherwise descendent credit score tendency into a virtuous circle of ascendant credit score. But, did you know that homeowners can get better deals on consolidation loans?

Debt consolidation is known for being the most efficient means for reducing debt and recovering the ability of getting finance by improving credit history. The main advantage of debt consolidation is that you stop paying multiple bills, loans and balances at variable rates and start paying a single fixed monthly installment. This has a significant beneficial effect on your finances.

Why Do Consolidation Loans Come With Lower Rates?

The reason why consolidation loans feature lower interest rates is that the purpose of the loan is to cancel all or almost all the outstanding debt and replace it with a single loan. Thus, the lender will become the only creditor or at least the creditor with the highest share of debt. Given that the debtor has now a single creditor and a single loan to repay (that features lower and more affordable installments), the risk of defaulting is greatly reduced which in turn lets the lender offer more convenient loan terms.

How Do Homeowner Consolidation Loans Work?

Homeownership offers the borrower the benefit of getting even lower interest rates. Either secured or unsecured consolidation loans, when tailored for homeowners come with lower rates and generally better terms than consolidation loans for non homeowners. This is due to the fact that the property acts as guarantee of the loan. When it comes to secured loans, the property guarantees the loan directly in the form of collateral or security. In unsecured loans, the property guarantees the loan too because it is part of the overall assets of the borrower, thus raising the amount from which the lender can collect the money he lent in the event of default.

Furthermore, homeowners not only get lower interest rates but also, longer and more flexible repayment programs and consequently lower and more affordable monthly installments. This helps warding off the risk of late payments or missed payments and thus contributes to improving the borrower's credit score.

How Is Credit Score Affected?

Homeowner Debt Consolidation Loans contribute to raise your credit score and improve your credit history in different ways. For starters, the reduction on the amount of interests you will have to pay and the more affordable monthly payments have an immediate positive impact on your credit report. Moreover, the continuous and timely payments of the consolidation loan installments will keep raising your credit score and improving you ability to get finance with better terms and more competitive rates. With time, those stains on your credit history will disappear for good and you will recover a good credit tag that will let you get cheaper finance. Thus, consolidating your debt with a homeowner loan is the smartest choice if you have debt problems and fear you might not be able to repay your debt.

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