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Is It Worth Using Collateral To Reduce Loan Costs?

When you strip away the hype, the different payment terms and the array of different loan offers in the market the bottom line is the same, the more guarantees you can give to repaying your loan the better the rate. For this reason alone we are seeing more and more people using assets which they hold, such as homes which have been paid off or investment bonds, as collateral in the hope of obtaining lower payment terms. But is it worth it?

For those in need of extra funds but not able to obtain access to their illiquid assets then a lower rate of interest in exchange for asset backing for the loan could be beneficial to all parties involved. However, do not go blindly into these arrangements as your asset is at risk if you fall behind on your payments or hit financial troubles.

You need to weigh up your personal circumstances, the potential assets you may have access to and the potential saving on the interest rate. Do not lose sight that your home or investment asset will be at risk if you do not keep up with your payments - something which many people seem to forget.

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