Do you think you can consolidate debt without collateral? If you are like the average American, there is a high chance that you owe multiple debts. It can be a combination of student loans, credit card debts, and even mortgage. Some would also have a car loan or personal loan. To make things even more difficult, the student loans and credit card debts are usually more than one.
How can you maximize your potential financially if you have so many debts to look after? It is hard to focus on improving your financial situation if you are too busy making sure that all your debts are paid on time.
This is one of the reasons why you need to enroll in a debt consolidation program as soon as possible. You want to deal with your debts early so it will not have the chance to compromise your financial future.
But how can you consolidate debt if you do not have collateral? When you have collateral, you can get a secured debt consolidation loan. Because of the nature of this loan, you can enjoy a lower interest rate.
While this may seem like the best option, you do not have to feel bad if you do not have collateral to offer. There are ways for you to consolidate your multiple debts despite a lack of collateral.
Three options to consolidate debt without a collateral
There are three options for you to consolidate debt without collateral.
The first option is to consolidate through a credit counseling service. This means going to a non-profit organization that offers this type of service to have an expert opinion on your debt situation. You will talk to a credit counselor who will look at your specific debt and financial situation. If you qualify, you will be enrolled in a debt management program. The credit counselor will create a personalized debt management plan that is based on your payment capabilities. This will ensure that you can afford to meet the monthly payments. This plan, once it is approved by you, will be sent to your creditors and lenders for approval.
Once everyone approves of the plan, you will send the total monthly payment to the credit counselor. He or she will be the one to distribute the payments to your different credit accounts. This is what makes it feel like you consolidated all your debts.
Balance transfer card
Another option to consolidate debt is to use a balance transfer card. One thing about this debt repayment program is that not a lot of people know about it. CNBC even shares that almost 49% of U.S. adults do not know about a balance transfer card. This keeps them from a really effective debt payment strategy.
A balance transfer card is a new credit account that you can apply for to help you consolidate your multiple credit card debts without collateral. These cards are usually offered with a 0% (or very low) interest rate. When you have a lot of high-interest credit cards, this will really help you save a lot of money. The 0% or low rate is offered for a limited time only. If you want to maximize the savings, you need to come up with a payment strategy that will help you pay all your balance within the promo period. At the very least, you should strive to pay the majority of the debt you transferred.
Finally, you can consolidate debt even without collateral by borrowing a personal loan. This can either be a specific debt consolidation loan or a typical personal loan. It does not involve any collateral since you are only using your name and your credit score to get approval for a loan. This means that the interest rate would largely depend on your score.
Taking out a personal loan is one of the more popular ways people consolidate their debt. The absence of collateral makes it enticing since not a lot of people want to put their assets on the line. Though a lower interest rate is more possible with secured debt, the thought of losing their property and other assets is too much of a risk. That is why a personal loan is a popular option for consumers in debt.
Signs you can use unsecured debt consolidation
While consolidating debt while keeping your assets safe is ideal, you need to analyze if it is the best option for you first.
There are two signs that unsecured debt consolidation is perfect for you.
High credit score
The average FICO scores of American consumers are at 704 according to a Forbes article. This means that a lot of people are slowly starting to take notice of how important their credit score really is. If you are one of them, this is a good sign for you. A high credit score means you are a responsible credit holder. You pay your dues on time and you meet your responsibilities as a borrower. You will get the best terms on the loan that you will borrow – and this will add to the savings that you can get when you consolidate debt.
It is also important for you to have a stable income. You have to remember that debt consolidation does not include a reduction in your debts. The most that it can bring you is a lower interest rate. But when it comes to the principal amount that you owe, you still have to pay your dues. It is important to have a steady source of income so you can meet your payments regularly.
If you have these two, you have a better chance of being successful when you consolidate debt. Soon, you will find yourself sending your final payment.