There are many types of debt consolidation loans. Each debt consolidation loan type has its own unique features and restrictions. Each of the different types of debt consolidation loans may be the most suitable for your individual situation.
The majority of the debt consolidation loans are unsecured loans. Many of these unsecured loans have higher interest rates, depending on the type of loan you choose.
Unsecured loans tend to be used when consolidating unsecured credit card debt. You may want to use the money to consolidate your store credit card balances or other unsecured debt.
Your credit card debts are unsecured because there is no collateral securing the debt. Your credit card balances are often combined into one account. This one account would be paid in a monthly payment.
Unsecured loans are also a good option for those who want to consolidate their student loans or other bills. Student loans typically carry very high-interest rates. Some student loans are even unsecured.
If you are unable to qualify for a secured loan, you can use an unsecured loan. This is especially useful if you have bad credit. The cost of an unsecured loan is higher than a secured loan.
Another type of unsecured loan is payday loans. These are unsecured loans that are available at a convenience store or other retail location. With a payday loan, you may only have to show identification.
If you get an unsecured payday loan, it is important to understand the terms and conditions of the contract before signing. When you sign a contract for an unsecured payday loan, you are entering into a commitment to pay back the money in a set amount of time.
If you fail to pay back the money you borrowed, you will not be eligible for a payday loan again. You could find yourself being sued for not paying back the loan amount.
With payday loans, the interest rate charged is typically the highest of any of the debt consolidation loans. Payday loans are not usually the first choice of consumers.
Another type of unsecured debt consolidation loan is an unsecured car or credit card debt. These are secured loans. In this case, you have collateral that can be protected against a lawsuit.
There are many debt consolidation loans you can choose from. The key is to find the one that suits your specific needs. Consider whether you want a secured or unsecured loan and what each one offers in terms of interest rates and monthly payments.