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Debt Consolidation Loan Unsecured

Debt consolidation loans are helpful when you have several loans which you are trying to manage and pay off all at the same time. You may have many high repayment loans such as credit cards, store cards or other existing loans. Obviously there is a minimum payment required by each of the lenders and when this total amount you have to pay each month becomes financially unmanageable, it is worth considering an unsecured debt consolidation loan. By taking out a new, single consolidated loan you can amalgamate all of your existing loans into one, leaving you with a single, affordable monthly repayment.
Unsecured debt consolidation loans are simply loans which do not need collateral such as your property to borrow against. By borrowing using an unsecured loan your property will not be at risk if you do not keep up repayments on it. Unfortunately this type of unsecured loan may have a slightly higher interest rate compared to a secured loan, but it carries less risk for the borrower.

Advantages of an Unsecured Consolidation Loan

  • the loan is not secured on your property so less risk of losing your home
  • you should be able to reduce your monthly repayments
  • there is only a single monthly repayment to manage
  • takes pressure off your existing lenders
  • you only have one creditor to deal with
  • no more warning letters from many lenders requesting their repayment

Disadvantages of an Unsecured Consolidation Loan

  • you may end up paying more over a longer time
  • there may be cost to set up the consolidation loan
  • it could be more difficult to negotiate with one lender
  • as all you eggs are in one basket, if your lender were to go into administration this could create problems as the money you have already paid them could be written off
  • if you were to repay the amount in full early, there could be a penalty
As the advantages outweigh the disadvantages it would be wise to consolidate your debts for piece of mind and knowing that you will have spare money at the end of the month. You don’t want your debts to control your life so if you don’t act soon, you may find that you can’t pay your existing loans and debts which can lead to late payments and this could affect your credit rating. By having a poor credit rating affects the ability to obtain borrowing in the future, be it for a mortgage or a loan for a car.