Unsecured Consolidation Loans: What You Should Know

What Are Unsecured Consolidation Loans?

In some instances, multiple bills can create financial hardship through unconventional means. Many debts carry different payment due dates, interest rates and late fee amounts. While a few of these debts can be bothersome, their accompanying fees and charges can create real problems. One way to solve the problem of having multiple debts at once is with unsecured consolidation loans. Here we will discuss the benefits and detriments of using unsecured consolidation loans and what you should expect.

Why Use Unsecured Consolidation Loans

Unsecured consolidation loans allow for quick and complete payment of any existing debts you may have. This can have many positive effects for your credit rating while eliminating multiple debts simultaneously. After making the necessary payments you would only be left with one main debt to take care of. Being able to focus your efforts on a singular debt can help you avoid late fees and paying unnecessary money.

Are Unsecured Consolidation Loans Better Than…

Bankruptcy? Most would probably agree that unsecured consolidation loans are better than filing for bankruptcy. Bankruptcy will put a dark spot on your credit for up to 10 years, preventing you from applying for credit. Waiting for a decade to recover your credit is not an issue you would have with consolidation loans. While garnering a loan relies solely on your credit rating, bankruptcy only needs you to pay for legal services. If you have poor credit, unsecured consolidation loans are harder to come by. Based on your financial standing, bankruptcy might be the only choice left.

Debt settlement? Once again, this form of debt relief doesn’t require your credit rating to be great to work. Debt settlement allows you the ability to pay less money to completely satisfy a debt. Instead of needing a loan from a financial institution, debt settlement can be achieved without a middleman. Unsecured consolidation loans can only allow you to pay off your entire debt. You won’t be able to save any money on your debts in this way. However, debt settlement generally takes a while to complete, whereas a loan is more immediate.

Credit counseling? While this is the least intrusive of possible forms of debt relief, it also does the least to rid you of debt. Credit counseling only provides you with information against debt. It does not actively relieve you of any debt like the previously mentioned forms of debt relief. Should your credit counselor suggest a debt management plan (and you accept it), this would affect your debt. A debt management plan is meant to remove certain fees and added charges in order to help with debt elimination. This can help, but should you choose to decline this offer you would be no better off with your debt.