Debt relief can be handled in many different ways and through many different methods. With debt settlement, credit counseling and even bankruptcy all viable options, many people may prefer debt consolidation in the end. This is because loans, whether secured or unsecured, can do much more with your debt and your credit. However, should you choose debt consolidation, the question remains on whether to use unsecured loans or secured loans to get the job done. Here we will discuss the benefits and detriments of both unsecured loans and secured loans.

Unsecured Loans

Benefits

The benefits of unsecured loans can far outweigh those from bankruptcy and credit counseling. Procuring an unsecured loan can be easy enough should you have the proper credit rating. This can increase the amount of available credit you have which can increase your credit score. Having the necessary funds to pay off the debts you owe can also increase your score almost immediately. This leaves you with one debt that you need to pay off afterwards. The main benefit of unsecured loans against secured loans is that you don’t have to borrow against any collateral. Should you get to a point that you can’t pay back the unsecured loan, you can even discharge the debt through bankruptcy.

Detriments

Unsecured loans can be helpful, but only if you have the proper credit. Having poor credit can put you in one of two situations. You can either have a loan with an exceedingly high interest rate or you can be outright denied your loan. This can leave you in a worse situation than when you started. The main issue with debt consolidation loans is the ability to display better financial sense. If you don’t exhibit better judgement with your finances, you can easily give yourself more debt than when you began. These detriments can extend to secured loans as well.

Secured Loans

Benefits

Secured loans can be borrowed against existing assets. This can help you bypass the need for having exceptional credit. Whether it’s against your car or your house, having the ability to borrow money from an asset you own can make things much easier. This can also incite incentive to make payments in order to keep (and protect) the asset used for the secured loan. Having a secured loan can also ensure that you get the amount of money you need as well.

Detriments

The main detriment of secured loans is the fact that if you don’t pay it back, you can lose the asset you’ve borrowed against.This means potentially losing your bank account, your car or even your home. And since the loan is secured, you won’t be able to discharge the debt through bankruptcy. This can put you in a world of financial hardship.