We all know how easy it is to fall into the trap of credit card/s debt/s.
It is not unusual to see many people queuing up to the Citizens Advice Bureau to receive counselling on credit card debts.
A common enough reason is that the monthly income cannot keep up with the expenditure.
Things can get so bad that some people are known to use their credit cards to pay off their mortgages or rents every passing month.
After the exhaustive juggling of as many 0% APR credit card deals they can come across so as to temporarily keep their debts at bay, some people might find themselves in a sticky situation when the 0% APR deals finally end and then they are obliged to pay interest on interest (anything up to 18% APR) on their credit card debts.
And unless they are able to make substantial repayments every month, their credit card debts are bound to escalate even further.
When this happens, many people then look further afield and attempt to consolidate their credit card debts by either taking out secured or unsecured loans.
A secured loan is a loan in which the borrower pledges to secure his/her property, as a repayment for the loan if he/she defaults in the monthly repayments.
An unsecured loan is more liberal as it is not secured against the borrower's property.
People can benefit from either a secured or unsecured loan because the repayment for the debt is over a longer period and the interest rate is lower than the APR on the credit card.
As it is with the obtaining of any credit, the lenders of Secured and Unsecured Loans will carry out the usual credit search.
The interest rate on the loan will be determined by the outcome of the credit search.
Because the secured loan is secured against the person's property, he/she will be regarded as less of a risk than the person who has an unsecured loan.
This type of loan is not secured against his/her property.
It is for this reason that the interest rate charged on unsecured loans is a lot higher than the interest rate charged on secured loans.