Reduction of Unsecured Debt Consolidation Loans

Eliminating debt is not an easy task. For this reason, many people carry high credit card balances for several years. Homeowners can take advantage of home equity loans or refinancing to reduce debt. In addition, people with vehicle rights or guarantees can get secured personal loans to pay off debts. However, there are also options to eliminate debt that does not require collateral.

What Is Unsecured Debt Consolidation Loans?

In short, unsecured debt consolidation loans are personal loans that do not require collateral. Before a lending institution such as a bank or credit union approves a loan request, the applicant must submit a kind of guarantee. Typical warranties include the vehicle’s title. Therefore, if the loan is not paid, the creditor can claim the applicant’s property.

Because unsecured debt consolidation loans are unprotected, they are more difficult to qualify. Each lender has different criteria. However, most lenders require good credit and substantial income.

If you expect to be debt free, a debt consolidation loan is the answer. Even though unsecured loans have a higher interest rate, this rate is much lower when compared to the credit card rate. In addition, debt consolidation loans have fixed conditions.

Other Debt Consolidation Options without Guarantee

Once again, qualifying for an unsecured debt consolidation loan is complicated. Some lenders do not offer this type of loan. In addition, lenders who offer unsecured debt consolidation loans have strict loan requirements. Unfortunately, it is not possible to get approval for unsecured loans with bad credit. In this case, you might have to look for other alternatives.

If a home equity loan or refinancing is not an option, you might consider transferring your high interest balance to a low-level credit card. This will reduce monthly payments and make it possible to reduce debt.

Another option involves debt consolidation through credit counseling or debt management agents. These agents negotiate lower interest rates, and consolidate unsecured debt or credit checks.

If you use such an agent, you will be placed on a payment package. Because debts are consolidated, a single payment is made to the debt management agency every month. These companies are very effective, and can help you become debt free in five to ten years.