Personal Unsecured Debt Consolidation Loans
When you are facing financial distress because you are carrying more debt than you can manage in your budget, debt consolidation provides a means to combine multiple debts at a lower interest rate. This reduces your monthly debt payments to make them more affordable so you can regain control of your finances. An unsecured debt consolidation loan is one option you have to consolidate, but is it the right option for you?
If you are thinking about using an unsecured debt consolidation loan to find debt relief but want an expert opinion to see if it is the right choice, give us a call at 1-800-320-9929 to speak with a certified credit counselor. A counselor can assess your debts in a free, no-obligation, confidential debt consultation or you can get started online with a request for a Free Debt Analysis.
How an Unsecured Debt Consolidation Loan Works
When it comes to your finances, unsecured debt can be difficult to manage. As your balances increase, your payments will as well. This means you eventually reach a point when the monthly payments on your credit cards get too high for your budget to handle. Debt consolidation offers a way to reduce the payments on your debt so you can regain control of your finances.
An unsecured personal debt consolidation loan is just one of the do-it-yourself debt consolidation options you have available. You take out an unsecured personal loan with your preferred bank or lender, and the money from the loan is used to pay off all of your credit cards. Effectively, this means the only unsecured debt you should still have to pay each month is the loan itself. This consolidates your debt into one monthly payment, with the goal being that you reduce the total amount you are expected to pay each month.
Additionally, the unsecured loan lowers the interest rate applied to your debt. Whereas your high interest credit cards may have interest rates at 15% APR or higher, a debt consolidation loan may decrease the interest rate to as low as 10% APR or less. This decreases the speed at which your debt builds interest and, as a result, you can get out of debt faster even though you pay less each month.
Qualifying with the Right Terms
One of the main difficulties in using an unsecured debt consolidation loan as a means for debt relief is qualifying at the right terms. If the interest rate is too high or the payment schedule sets the payments higher than you can afford in your budget, the loan will not provide the kind of relief you need. With the wrong terms on the loan, you could end up paying more each month and/or taking longer to pay back everything you owe. In either case, your debt solution can actually make your debt problems worse.
This makes qualifying at the right terms essential if you want to use an unsecured debt consolidation loan successfully. However, getting the right terms is highly dependent on your credit scores. If you have excellent credit, you can qualify for attractive terms on an unsecured loan, but this can be difficult if you have less than perfect credit. If your financial difficulties have already caused you to be late or miss payments entirely, your credit rating may not be strong enough to qualify for the right terms. In this case, you would be better off using an alternative debt relief solution where your credit is not a factor, such as a debt management program.
If you are in debt and need help finding the right solution for your unique financial situation, give us a call today at 1-800-320-9929 to discuss your finances with a certified credit counselor. They will review your debts and budget for free to help you determine the right path forward so you can make a more informed decision for your financial future. If you prefer, you can start the process online with a request for a Free Debt Analysis.