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Unsecured Debt Consolidation Loans - Debt Reduction Without Using Collateral
What are Unsecured Debt Consolidation Loans?
In a nutshell, unsecured debt consolidation loans are personal loan that do not entail collateral. Prior to a lending institution such as a bank or credit union approving a loan request, the applicant must submit some sort of collateral. Typical collateral includes a vehicle title. Hence, if the loan is not paid, the lender may claim the applicant's property.
Because unsecured debt consolidation loans are not protected, they are harder to qualify for. Each lender has a different criterion. However, most lenders require good credit and a sizeable income.
If you are hoping to become debt free, a debt consolidation loan is the answer. Although unsecured loans carry a higher interest rate, the rate is considerably lower when compared to credit card rates. Moreover, debt consolidation loans have fixed terms.
Other Debt Consolidation Options without Collateral
Again, qualifying for an unsecured debt consolidation loan is tricky. Some lenders do not offer these types of loans. Furthermore, the lenders that do offer unsecured debt consolidation loans have strict lending requirements. Unfortunately, it's impossible to get approved for an unsecured loan with poor credit. In this case, you may have to explore other alternatives.
If a home equity loan or refinancing is not an option, you may consider transferring your high interest balances to a low rate credit card. This will lower monthly payments and make is possible to reduce debts.
Another option involves consolidating debts through a credit counseling or debt management agency. These agencies negotiate lower interest rates, and consolidate debts without collateral or credit checks.
If using such an agency, you will be placed on a payment plan. Because debts are consolidated, a single payment is submitted to the debt management agency each month. These companies are very effective, and can help you become debt free in five to ten years.
