Unsecured Debt Consolidation

Many who struggle with debt look for any way out they can. If you find yourself in debt, stop to consider what options are available to you and consider visiting a credit counselor to help you decide the right decision for you.

One possible solution to debt is a debt consolidation loan. This loan will either be secured with some type of property as collateral: your house, your car, a bank CD, etc. or it will be unsecured. Secured loans are risky on your part because if you default on the loan you will most likely lose whatever the loan is based on.

Unsecured loans are not based on anything you own, so you are a higher risk to the lending institution. They will give you a higher interest rate because of the higher risk. Also, if you have struggled with paying your bills on time, you will have a lower credit rating which will also increase the interest rate on your unsecured loan. This unsecured debt consolidation loan will allow you to pay off your credit card and other debt. However, the interest rate on the new debt may or may not be better than on the old debt. An unsecured debt consolidation loan might end up requiring you to pay more in the long run than other options.

Also, if you have high debt or low credit, you may have substantial difficulty gaining approval for a loan. Some lenders may be leery of granting you even more credit than you already have.

A way to achieve debt consolidation when an unsecured debt consolidation loan is not an option is to sign up for a debt management plan. Debt management plans allow you to pay your debts each month in one bill, but you keep the original accounts. The debt management company will insure that each company is paid from the money you give them. They will also work with those companies to lower the fees you owe so that more of your money will go to paying off your actual debt. Most people that qualify find that they are able to pay off their debt in as little as three to five years.

Be careful when choosing which debt consolidation plan is right for you. You do not want to end up with a loan or plan that will hurt you.