All debt falls into two categories: secured and unsecured. Secured debt consolidation involves some type of collateral (most commonly a person’s house) to back up the loan in case of failure to pay. But many people don’t have the necessary home equity or enough collateral to qualify for secured loans. In this case, unsecured debt consolidation may be your only option.

An unsecured loan frees an individual from paying multiple creditors, and now they only have to pay a single creditor every month. Unlike a secured loan, an unsecured debt consolidation loan doesn’t carry the risk of losing collateral like your house if you can’t pay the loan amount. Knowing that your house cannot be repossessed is peace of mind for those with unsecured debt consolidation loans.

But lower risk for you means that the lender assumes a higher level of risk. This means that interest rates on unsecured loans will be higher and the total loan amount will be smaller than seen with secured loans.

Is an unsecured debt consolidation loan for you? It really depends on your financial situation. If you rent your home or don’t have very much equity in your house, you may have no other choice for a debt consolidation loan. But even if you do own your home and have sufficient equity, you might still choose an unsecured loan. Putting your house on the line is a very scary thing for many homeowners and they would often rather pay more in interest than run the risk of losing their house should the unexpected happen and they find themselves unable to repay their loan.

Debt consolidation is done for lots of different reasons and under many different situations. Some people may have a lot of student loans to pay off; others may face outstanding medical bills or multiple hefty credit card balances. Whatever the reason that you may need consolidation for your debt, look into secured versus unsecured debt consolidation loans. Compare not only monthly payments but how much you will be paying your lender overall, and decide what is best for you.

With debt consolidation loans, one size doesn’t fit all. Working with a certified financial advisor may be one way to effectively evaluate your finances and take the next step toward becoming debt-free. A list of non-profit HUD-approved financial counselors is available at your local HUD office, so check them out if you’re not sure what step to take next.

Click here to get the help you need to consolidate unsecured debt today.