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Why choose unsecured debt consolidation loan over secured ones?
While consolidating your debt, you have the option either to get a secured or an unsecured debt consolidation loan. It is an important aspect of decision-making since a wrong decision can worsen your situation further.
When fighting off your debt you must take extreme precaution not to further jeopardize your current financial condition. An unsecured debt consolidation loan can be a better choice than a secured one since you wouldn't have to offer your home as collateral to get the loan. You can consider it as an option when
• You're staggering under huge debt burden.
You can also consolidate your debts with a secured consolidation loan and often it is more easily available in the market as the lenders interests remain secured with the collateral. However, unsecured debt consolidation loan is also popular because of the following features.
• The unsecured loan, as the name suggests, doesn’t require collateral. Hence, you won’t lose collateral if you default.
• Since no collateral is involved, lesser paperwork is required during its processing.
• Lesser paperwork also implies lesser time in getting loan approval.
• It has a fixed time for repayment. Normally, the borrower is required to repay the loan within a 5 year period.
• There is no risk involved for the borrower in obtaining the loan. The unsecured loan can even be discharged in bankruptcy.
Obtaining an unsecured debt consolidation loan, however, can be difficult for a consumer with poor credit score. Though there are lenders who have specialized in forwarding bad credit loans but you may have to pay higher interest for that. Also, the processing charges vary widely amongst the lenders. Hence, you must shop around to compare the cost of borrowing between the lenders before getting the loan.
Though unsecured debt consolidation loan would help you in consolidating your debts with a single payment, at lower rate of interest but it might not suit everyone. Hence, you must make an informed decision keeping in mind your financial situation.
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