An unsecured loan is one that is not backed by any collateral, such as your car or other personal property. Your promise to pay the loan back is the only guarantee a lender will receive. As a result, you may find it more challenging to qualify for an unsecured loan, and the loan may carry a high interest rate.
Credit Card Balance Transfer
Probably the easiest way to get an unsecured loan for debt consolidation is via a credit card balance transfer. Credit card companies sometimes send out unsolicited offers for balance transfer, either via online transfers or paper checks. As an enticement, these offers typically carry teaser interest rates of as low as 0 percent for a certain period of time, although a 3 percent transfer fee is common.
Video of the Day
To process your online transfer, all you have to do is enter information about the banks carrying your unsecured debts, such as their name and address, along with any amounts you want to transfer. If you use a paper checks, you can mail them directly to the receiving banks. If you prefer, you can even write the check out to yourself, deposit it in your bank, and use your own bank account to pay off your outstanding debts. This is likely the route you would have to take if you want to consolidate any secured debts, such as car loans. Once you've completed any of these transfers, you'll have consolidated your outstanding debt into one unsecured debt that you owe your credit card company.
Personal Bank Loan
The other major type of unsecured loan you can use for debt consolidation is a personal bank loan. You'll usually need a higher credit score to get this type of loan. To improve your chances of getting a personal loan, anticipate what assurances the lender will need. For example, since an unsecured loan is backed only by your promise of repayment, be prepared to show financial documents outlining your current income and savings, along with the amount of your monthly expenses. Since your intention is to consolidate your outstanding debt, show the lender how much you owe and what rate you are paying. Understand that the lender is likely to run your credit report and get your credit score. If you can demonstrate that you have the means to pay back the loan, are employed and have a good credit score, you're more likely to get approved.