A personal loan is typically an unsecured loan or a secured one from various types of lenders. Sometimes personal loans are viewed as unsecured loans only because they are not for the purchase of things that can be considered collateral like properties or vehicles. When the money for these types of loans is used to repay all present debts, they might be called personal debt consolidation loans.

Generally when personal debt consolidation loans are unsecured, it means that the lender only relies on the credit score of the individual seeking the loan, without consideration as to collateral. Sometimes personal debt consolidation loans are given when a person transfers all credit balances to a single card with a low introductory interest rate or lower regular interest rate. There could be good reasons for getting one of these loans since it would mean paying lower interest on all debt currently owed, and only having to make one payment per month. Some people may save money by transferring all debt to a single card, or by taking out a loan, unattached to credit cards to consolidate all debt.

Sometimes when people define personal debt consolidation loans, they do so in a different matter and can refer to secured loans against something they own. For instance, people might consolidate personal debt (credit card and other debt) into a home equity loan. There is often greater advantage to this scenario than the one that involves getting another credit card or a personal loan. Interest rates for home loans are usually much lower.

In fact it’s often the case that secured loans have better interest rates than unsecured loans. The disadvantage is it means losing equity in property owned, which will have to be repaid. It’s not an option open to everyone because lending practices have changed since the late 2000s, and home values have dropped, creating upside down mortgages. People can only get an equity line of credit or loan if they possess the actual equity to borrow against.

Personal debt consolidation loans may be obtained from a variety of sources. Credit card companies may offer them or banks might advertise them. They will likely require that the person seeking the loan has good to excellent credit, since no lender wants to lend money, especially on an unsecured basis, without feeling certain they will receive it back. This can be one of the inherent problems with debt consolidation. A number of people choose this option because they’re having trouble making payments, and most lenders are well aware of this fact. Proving that the trouble is only a matter of interest and inconvenience is the job of the prospective borrower, and this means having a very good credit history.

Another option for some people, and a way in which they might define personal debt consolidation loans, is by borrowing from non-traditional lending sources, like family members or friends. Perhaps a family member is able to make a significant loan to help a person meet their debt obligations. In these cases terms of repayment should be fully understood by all parties, to eliminate any potential conflicts that might arise from failure to repay.

Personal debt consolidation loans typically refer to those loans taken out to consolidate all present unsecured debt. Loans themselves may be secured or unsecured, and the latter usually will have higher interest rates. Many people find that loan consolidation is attractive in any of its forms when it reduces monthly interest paid, but it has become more difficult for borrowers with less than perfect credit to obtain these types of loans.