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Unsecured debt consolidation loans are loans that individuals take out from a bank without placing any collateral for the loan. Such loans are availed to pay off credit card debt or medical bills. Normally
debt consolidation is undertaken to reduce and eliminate debt by paying off a high-interest unsecured loan
like credit card debt
with a low-interest secured loan like a home equity line of credit. Debt consolidation thus helps in lowering interest rates
which works in the long run to eliminate debt faster.

Unsecured debt consolidation loans are not secured by any collateral like a home or a car. These are mostly in the form of personal loans. Personal loans are one way of paying off credit card debt if one does not own a home or a car. Many banks offer such plans for their customers who have a satisfactory banking history with them. However
interest rates on unsecured personal loans would be higher than a secured home-equity line of credit.

Usually
the amounts disbursed as unsecured debt consolidation loans are lower than what would have been if the debt consolidation loan was secured. Wells Fargo Financial
for example
offers its customers home equity lines of credit for debt consolidation starting at $10
0
whereas unsecured personal loans for debt consolidation at capped at $10
0
So unsecured debt consolidation loans are essentially for those individuals who carry lower credit card debt
but still want to consolidate it and eliminate it completely.

While an unsecured debt consolidation loan is a good way to pay off high-interest credit card debt
very often individuals end up a few years later with a similar credit card debt and the added burden of paying off the personal loan. The critical element to debt reduction and elimination is to keep a check on one’s spending. There are secured and unsecured debt consolidation loans available to help one out of debt
but the process must start at the individual’s level.