Take Advantage of Unsecured Debt Consolidation Loans
Once you decide that you're going with a loan to consolidate your debt, then you just need to choose the loan type. And that usually depends on the situation you're in financially.
You can go with secure or unsecure loans. With unsecured debt consolidation loans, your loan is not backed by collateral, but rather by your credit. So getting approved basically comes down to whether your lender thinks you are creditworthy. Usually, you will need good credit to qualify.
Debt that is unsecured can be credit card debt or some other personal loan. Because there is no collateral, these loans are considered to be more risky by lenders than a loan that is secured with some kind of asset.
And for that reason, this loan has higher interest rates than some other loans such as a mortgage.
Benefits of an Unsecured Debt Loan
Even though the interest rate on this loan may be higher than other loans, it's still lower than your credit card rates.
And that's how you can take advantage of this loan option.
For example, if the rates on your cards are 20% or higher, and you can get an unsecured debt consolidation loan at around 10%, then you would be cutting the amount of interest you pay in half.
That's a good amount of monthly savings. And it can go a long way toward helping your overall financial picture because of the extra money you'll save.
But as mentioned earlier, you will most likely need good credit to qualify. And that may eliminate a lot of would-be borrowers. Lenders just won't give out this type of loan unless they feel that the person borrowing can really pay it back.
Again, it comes down to the risky nature of this option. Without collateral, lenders just won't take the risk.
So what happens if you don't qualify? What are your options then?
Here are the other options you have...
If you can't get approved for an unsecured loan, you still have some alternatives that you can try.
If you own a home and have some equity built up, then you can go with home equity loans.
With this solution, you will be putting your unsecured debt together with your mortgage. Your home then becomes collateral and makes this solution a secured loan. You can choose to go with a balance transfer card or a debt negotiation plan also.
If you don't have too much debt, then a balance transfer card might be able to help you. With balance transfer cards, you move all of your other card debt into a new lower rate card. You do need to be creditworthy to qualify for this type of solution.
The debt negotiation plan, also known as debt settlement, is much easier to get approved for.
As you can see, even if you don't qualify for unsecured debt loans, you still have other avenues you can take.
If you're not sure which solution is right for you, then you should carefully examine all of your options before you commit to anything.
In fact, you can get all the info you need just by following this site.
Every subject related to debt is explained. So no matter where you are in your financial recovery, you can find the answers to the most important questions.
And you can find them fast and easy.
- How to use your home's equity to consolidate
- The logical way to consolidate your debts
- The fees you pay when consolidating