If you are making many payments every month to different creditors, you may consider getting an unsecured debt consolidation loan. Making a single payment for your debts may be easier and more convenient, and may help you get your finances back on track. There are advantages and disadvantages to consolidation loans so it’s important to know the details. Our debt consultants and financial advisors are experts at helping people find the type of program that best fits their needs. A simple phone call can help you sort our your options without any cost or obligation.


If you have a home with equity, one of the best options for a debt consolidation loan is a cash-out refinance. People who qualify for a cash-out refinance must have sufficient equity in their homes, strong incomes, and good credit. If you have many high interest debts and are juggling multiple accounts, this option may help you lower your monthly payments and get out of debt faster. The cash-out refinance effectively shifts several of your unsecured debts into a single, new debt that is secured by your home.



Who Debt Consolidation is best For?


Debt consolidation isn't right for everyone. If you don't have a large amount of debt (at least $10,000) then there are likely other options that are better. Consolidation loans often require collateral, especially if you want to secure a good interest rate.


A collateral-based loan is a loan secured by an asset you own. So to get this type of loan you need an asset that is of sufficient value to be acceptable by the lender. As we mentioned above, this could be a house or condo, a car or another asset of adequate value. The greater the value of your asset, the less the risk for the lender, which means you’ll get a better interest rate. So if you have a valuable asset that is acceptable to the lender, and you know you can make the payments, then this could be a good option to help you get out of debt.


What happens if you don’t have collateral? Not everyone is a homeowner. Some lenders will offer unsecured loans. With an unsecured loan, you will likely have to pay a higher interest rate. If the interest rate is too high, then this type of loan may be difficult to pay off and may not be your best option.



Debt Consolidation Pros:

  • Possibility of a lower interest rate with a secured loan
  • Make just one payment a month to one creditor
  • May make larger debts more manageable 


Debt Consolidation Cons:

  • Personal assets (e.g. your home) may be at risk
  • Will not reduce the amount you owe
  • Interest rates may not always be lower - in some cases, it may even be higher



*Before you do anything, make sure you know all your options. Speak to a debt consolidation professional or a financial advisor who is an expert in debt relief management.

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