If you are planning to get out of debt with a debt consolidation loan, you need to be aware of the fact that you have two options.
You can get a secured debt consolidation loan, or an unsecured debt consolidation loan.
Let's take a closer look at both options.
Unsecured debt consolidation loans do not require you to use anything as collateral for the loan.
You simply sign for the loan, agreeing to pay as promised.
You need to know two things about this type of debt consolidation loan.
First, because there is nothing in place to secure the loan, these are the hardest type of loans to get, and second, because there is no collateral to secure the loan, the interest rate is usually very high.
Secured debt consolidation loans do require some tangible property to secure the loan.
If you do not repay the loan, the property will be repossessed by the Loan Company or financial institution.
This is the easiest type of loan to get, and if the property is of high enough value, you may be able to obtain this type of loan even if you have bad credit.
However, if your credit is bad, you can still expect to pay a higher rate of interest, as with any other bad credit loan.
Obviously, in terms of the cost of credit, the secured loan is the best option.
This is also the best option if you have poor credit, despite the higher interest rate.
The interest rate for an unsecured loan would be even higher in most cases, and again, if you have bad credit, you may not be able to obtain an unsecured debt consolidation loan.
Talk with a debt counselor to determine which option will work best for you, and carefully consider the property that you will put up as collateral, understanding that if you do not repay the loan as agreed, you risk losing that property.