People can get unsecured debt consolidation loans from a bank without putting anything up as collateral. People get these loans to pay off medical bills or credit card debt. Usually, debt consolidation is done to reduce and get rid of debt by paying off an unsecured loan with a high interest rate, like credit card debt, with a secured loan with a low interest rate, like a home equity line of credit. So, debt consolidation helps lower interest rates, which helps pay off debt faster in the long run.
Unsecured debt consolidation loans don't have anything like a house or car as collateral. The majority of these are personal loans. If you don't own a home or a car, a personal loan is one way to pay off credit card debt. Many banks offer these plans to customers who have been good bank customers in the past. But unsecured personal loans would have higher interest rates than a secured home-equity line of credit.
Most of the time, the amounts given out for unsecured debt consolidation loans are less than what they would have been if they were secured. Wells Fargo Financial, for example, lets its customers consolidate debt with home equity lines of credit starting at $10,000, while the most they can borrow with an unsecured personal loan for debt consolidation is also $10,000. So, unsecured debt consolidation loans are mostly for people with less credit card debt who still want to consolidate and get rid of it all.
An unsecured debt consolidation loan is a good way to pay off high-interest credit card debt, but people often end up with the same amount of credit card debt a few years later and also have to pay off the personal loan. Spending less is the most important thing to do to get out of debt and stay out of debt. There are both secured and unsecured debt consolidation loans that can help someone get out of debt, but the process must start with the person.
