The collateralization allows a lower interest rate

However, sometimes is a good thing to be very careful about secured or collateralized loans. If you are using your home equity to consolidate, you need to very careful and understand possibility of risk. Just make sure you stay current with your all payments or you could be risking losing your home. When borrowers choose to get a new financial help, it is pretty much a matter of fighting with a fire. But the risk here is that once you rework your debt, you may become tempted to pile on additional financial problem because the lower payments could make you feel complacent.

More often is involve a secured loan consolidation against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house. The collateralization allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.

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