Unsecured Debt Consolidation Loan Definition

Unsecured debt consolidation is a type of debt consolidation loan where no asset is pledged as collateral for the loan. Imagine (maybe you don’t have to imagine) you have a few small credit card debts and a past-due utility debt that are all accumulating high interest and an occasional late fee. Assuming you have pretty good credit and a good income, you could approach your credit union and obtain an unsecured debt consolidation loan: the credit union would issue a loan in an amount sufficient to fully pay off all of the small debts. Voila! You have only a single debt at a low interest rate and you’re freed from those pesky smaller accounts.

Unsecured debt consolidation loans are available, but usually only to those with good credit ratings, reliable and provable income, and relatively small debts. As with any unsecured loan, an unsecured debt consolidation loan will always bear a higher interest rate than a secured loan.