Using an Unsecured Personal Debt Consolidation Loan to Lower Your Monthly Payments

If you have a good or excellent credit repayment record, an unsecured debt consolidation loan could be a great way to lower your monthly payments and ease the stress of a tight budget. Unsecured debt consolidation loans don't take the equity out of your home, and can often have lower interest rates and monthly payment than most of the credit cards you may be paying on. It rolls the numerous payments into one monthly payment, which makes it easier for budgeting.

A regular personal debt consolidation loan usually is referred to as a "secured debt consolidation loan" and is the same as a home equity loan, in that it is based on your equity in your home. An appraisal is normally done, and a second mortgage is placed on the home as collateral. Sometimes, an auto may be used as collateral if it is paid off.

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Secured personal debt consolidation loans often have higher upfront costs involved-- which are normally lumped into the loan such as appraisal fees, origination fees, title searches and take longer to process. Many people use home equity debt consolidation loans for the same thing, but normally those with a less-than-perfect credit score are required to go this route because it is a riskier loan and so the lender wants additional collateral. If the payments are not made, it can be foreclosed just like a first mortgage loan would be.

An unsecured personal debt consolidation loan differs in that better credit is required, since no collateral is required, and a lender wants reassurance of repayment. These type of loans are normally for people who have had an unusual circumstance that has caused them to have to use their credit cards or they have just gotten sick of keeping up with numerous higher interest rate bills each month, and want to consolidate them into a lower interest loan.

Because an appraisal on your home isn't necessary, and no title searches are involved, an unsecured personal debt consolidation loan usually just requires verification of income sources and credit reports and the balance and account numbers on the credit cards to be paid off. If the monthly payments on the credit cards exceed the expected consolidation loan payment, then the loan is justified, because the borrower will have lower monthly payments, and it will be easier to repay and free up monthly cash for other things, as well. The unsecured personal debt consolidation loan is written and funds dispersed quickly, with very little in upfront fees, if any.

The important thing is to think ahead and don't let your credit card payments start getting behind, since good and excellent credit is important for the approval of an unsecured personal debt consolidation loan. While there may be a credit crunch, with borderline credit applications being turned down, good and excellent credit rating customers can still get credit on an unsecured personal debt consolidation loan fairly easily and quickly.

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