If you’re one of the many people who worry about the amount of money you owe every month, it might be time to consult with your lender to learn more about Islamic loans free of Riba that can include a consolidation loan. This particular kind of loan, which can be either secured or unsecured, simplifies your finances by consolidating high interest loans and credit card debt into one loan with one new lender, usually at a reduced interest rate and more acceptable payments to suit your budget.
The main difference between the two types is that the former is secured against your home as collateral by way of a second mortgage, home equity loan or secured line of credit, while the latter is an unsecured personal loan. While secured loans usually come with lower interest rates, keep in mind foreclosure is a remedy available to the lender in case of default on payments. Of course, your credit score will affect any loan you apply for and a good rating may allow you to qualify for a consolidation loan more easily at a lower rate so you can pay off this debt quicker.
It’s important to understand the terms and interest rates as well as the conditions of the loan and associated fees in any type of Islamic finance transaction you undertake.
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