Understanding Unsecured Debt Consolidation LoansUnsecured debt consolidation loans are a type of debt consolidation loan that does not require any collateral. It’s money that’s loaned usually on a short-term basis for the purpose of consolidating unsecured debt. Here’s what you need to know about unsecured debt consolidation loans.
Benefits of unsecured debt consolidation loans
The major advantage of unsecured debt consolidation loans is that collateral is not required. Therefore, there’s no risk of losing your home in the event you default on this loan. Secured loans typically use a borrower’s primary residence as collateral and knowing that your home could one day be subject to foreclosure proceedings adds a tremendous amount of stress to an already stressful situation.
Unsecured debt consolidation loans are a welcome relief for those debtors who need help but who do not have a major asset such as a home to put up as collateral. Renters, students and anyone else who has debt but does not have a mortgage can apply and take advantage of this funding source.
Even if you do own a home, you can still apply for and obtain unsecured debt consolidation loans. That way, you can deal with your debt obligations and not have to worry that one day you might not have a home to go to.
Disadvantages of unsecured debt consolidation loans
There are a few disadvantages associated with unsecured debt consolidation loans and anyone applying for one should know what they are. First of all, because the lender bears more risk, you can expect the interest rate charged to be higher than that which would be associated with a secured debt consolidation loan. Pay attention to this rate and understand that at the end of the loan term, you still will have paid a considerable amount of money in interest. Therefore, it’s worth your while to shop around in search of the best terms.
Another potential disadvantage associated with unsecured debt consolidation loans is that these loans aren’t always easy to obtain. Since the lender assumes more risk by not requiring collateral, they’re more selective about who they’ll approve. Lenders look closely at an applicant’s credit history; a key determining factor in the loan’s approval or disapproval. Unfortunately, by the time most people seek help for their debt they’ve already mismanaged it.
How to apply for unsecured debt consolidation loans
The fastest and easiest way to apply for unsecured debt consolidation loans is online. With a few clicks on the keyboard, you can check multiple lenders’ reputations, check and compare interest rates and other fees from the various lenders and even complete the application process.
Another source of unsecured debt consolidation loans may be your local financial institution; the place where you do your regular banking. Since you’re already a customer, it’s worth your time to find out what your bank has to offer. If your bank isn’t able to accommodate your needs, you likely can apply for unsecured debt consolidation loans at other nearby banks, credit unions, and financial institutions.