If you are really struggling to make ends meet, you have to take a look at your choices for lowering monthly payments. One solution that is heavily advertised is getting a secured loan for debt consolidation.

To hear those who are selling debt consolidation secured loans, you would think that debt consolidation loans are a no-brainer, that anyone would be stupid to not take advantage of the ability to get rid of their little, individual debts and just have one smaller payment each month. But is this really the truth about debt consolidation loans, whether secured or unsecured? Let’s take a look at some of the facts about a secured loan for debt consolidation.

Secured Loans, Defined

A secured loan is one where the person you owe money to has some form of collateral, which can be taken if needed to satisfy the loan. Examples of this are a mortgage or a car loan. If you neglect to pay on your car loan, they can come and repossess the car. In the case of getting a secured loan for debt consolidation, the collateral would generally be money. This is usually offered by a bank or credit union, by way of the borrower having a savings account with the creditor. The money in the savings account is kept by the creditor as a hedge against your defaulting on the loan. Your money would be earning interest, but you wouldn’t be able to withdraw it, until more of your debt is repaid, or according to the stipulations of the agreement.

Good News? Bad News?

In terms of risk, the creditor has very little because the money is already in their hands. Consequently, the creditor will sometimes offer a lower interest rate, which benefits the borrower. The disadvantage is that the borrower is limited to the amount of money that is in the savings account.

Other Ways To Consolidate Your Debts

There are other ways to consolidate debts than with a secured loan. Check around for a credit card that has a high credit limit and a low interest rate. You can take all your other balances and put them onto that card. Often, new credit cards will totally waive the interest on balances transferred on.

Another option is to contact a company that specializes in debt consolidation without a secured loan. They can help by contacting your creditors and arranging for a reduction in your interest or by simply wrapping your debts into one monthly bill for you.

Many people have too much debt. While some is secured debt, like a mortgage on your home or a auto loan, most consumer debt is unsecured: medical bills, store charge accounts, credit cards, gas charge cards, etc. It can be so easy to begin accruing debt, but it can be so hard to get it all paid off.

If you are struggling with the weight of too much debt, you will need a way to have the payments end – as soon as possible. Though you could possibly refinance for a loan for debt consolidation, a better answer is an unsecured debt consolidation loan. With a debt consolidation loan for your unsecured debt, you can have lower monthly fees and save on interest rates. It can also help improve your credit rating by having your bills paid on time. Another big bonus is that the embarrassing and annoying calls from collection agencies will stop.

Who Handles Debt Consolidation Loans?

Most people who get a debt consolidation loan work with a specialty company. The debt consolidation company has experience working with creditors, and they can often negotiate a lower interest rate, get rid of fees and penalties, and make a more favorable agreement with them.

How Unsecured Debt Consolidation Loans Work

When you get a debt consolidation loan for your unsecured debt, the consolidation company will, after negotiating with each creditor, lump all your debts together. They will calculate your payment for each month based on the lowest amount that your creditors will allow. The company takes a bit of your payment for their trouble, then pays your debts each month so that the minimum payments are being made.

How Can Debt Consolidation Help You?

If you consolidate unsecured debt with a loan, you can avoid harassment from your creditors, lower your payments, and be able to make just one monthly payment. Generally, the company who gives you a consolidation loan for your unsecured debt will insist that you close your credit card accounts, which will help you stay out of the debt trap in the future. (Sometimes you can keep one or two for an emergency, just not an “emergency” of a sale at the shoe store!) Many companies also offer financial education to help you learn better habits for the future.

Imagine being free of the debt you currently have. Imagine having a positive financial outlook, and being able to save for the future. These can be possible by consolidating unsecured debt and using a loan to help you pay off your consumer debt.