Multiple debts mean multiple interest rates and payments. Separate payments on varying interest rates can be costly. Merging multiple loans into a single loan, or debt consolidation loan, make sense. A consolidation loan is used to pay off existing loans and consolidates the amount into one loan. Instead of paying a number of creditors, there is only a single monthly payment. Debt consolidation can be of two types, secured or unsecured.

Secured debt consolidation loans are offered against property or home and if the borrower does not pay the debt consolidation loan in full, it will be recovered through a liquidation of the home or property. But for the people who do not have a home or who do not prefer to keep their homes as collateral this feature of secured debt consolidation loan makes them especially unlikely. These people instead prefer unsecured debt consolidation loans.

In an unsecured debt consolidation loan there is no need for collateral. Collateral is a backing for the loan. All the advantages of a debt consolidation loan can be obtained through an unsecured consolidation loan. And some of the advantages of it is that borrowers personally do not have to make the payments to the creditors. They are relieved of remembering the various debts in their account. They just have to give the loan provider a list of the debts and sufficient arrangement will be made by the loan provider.

After taking out an unsecured debt consolidation loan, there is a grace period before the repayment schedule goes into effect. This is beneficial to borrowers who need some time to normalize their finances to be able to pay off the loan in small, affordable installments. The processing time for an unsecured debt consolidation loan is shorter than secured loans because the borrower does not put up any collateral. With an unsecured loan, the borrower has cash in hand quickly.

But for people with just good, fair or poor credit, unsecured personal debt consolidation loans may be harder to get and the maximum loan available will be around $5,000-$15,000 depending on your exact credit and employment situation. For these people the only way is to get a secured debt consolidation loan.

Usually a debt consolidation loan runs for about 20-30 years. This means that the stage of total financial freedom will take a while to come, but then the monthly payments are mostly lower than other loan options and also this does not affect credit rating negatively at all. Debt consolidation will minimize the monetary hassles and if the nature of the debt loans is unsecured there will be no danger of loosing your property even in a scenario where you can’t make a refund.

Having multiple loans with multiple interest payments can be costly. By taking out an unsecured debt consolidation loan, borrowers can save money and have a lower single monthly payment. Although the borrower’s term of debt loans might lengthen, there will be no negative impact on credit scores and the gap between the payoffs of the old loans and the first payment of the consolidated loan gives the borrower time to organize his finances. Unsecured loans may be difficult to get if borrowers have fair or poor credit. The largest amounts for these loans could be as high as $15000. The length of these loans are 20-30 years.

- Bruno Auger