Types of Debt Consolidation Loans
Debt consolidation loans can be categorized into secured and unsecured loans. Secured loans require collateral such as home equity, while unsecured loans do not. Below are the Common types of consolidation loans
Types of Debt Consolidation Loans |
Description |
Category |
---|---|---|
Personal Loan |
Unsecured loans offered by banks, credit unions, or online lenders. They provide a lump sum payment that can be used to pay off multiple debts. Interest rates vary based on creditworthiness |
Unsecured |
Balance Transfer Credit Cards |
Credit cards that offer a promotional 0% APR for a specific period, typically ranging from six months to two years. Cardholders can transfer balances from high-interest credit cards save on interest. |
Unsecured |
Home Equity Loans |
Secured loans that use borrower’s home equity as collateral. They typically offer Lower interest rates compared to unsecured loans but come with the risk of losing the home if the borrower defaults |
Secured |
Home Equity Lines of Credit (HELOC) |
Similar to home equity loans, HELOCs use home equity as collateral but function as a revolving line of credit. Borrowers can access funds as needed, making them suitable for ongoing expenses or debt consolidation |
Secured |
Federal Student Loan Consolidation |
Consolidation of multiple federal student loans into a single loan through the Federal District Loan Consolidation Program. The interest rate is a weighted average of the loans being consolidated. |
Unsecured |
Private Student Loan Refinancing |
Refinancing multiple private student loans into a single loan with a private lender. Borrowers may qualify for lower interest rates, potentially saving money over the life of the loan |
Unsecured |
Contact Us