The most popular no collateral loan is referred to as a credit card debt consolidation loan. What people generally do is transfer as many debts as possible onto one credit card. It's much easier to keep track of one company and one payment than it is multiple companies.



There are several reasons this option is used. First, there is no long process approval and mounds of paper work to go through. This type loan does not require that you put up collateral.

In addition, many major credit card companies offer very favorable terms for consolidating all your bills onto their credit card. They offer two compelling reasons:

1. They offer you several months of payments with no interest. You should be able to get a twelve-month no interest option.

2. They normally offer you a much lower interest rate at the end of the twelve-month grace period. This is usually much lower than your current interest rate.

This is very attractive for many people that have no collateral for a loan. However, there are some very definite drawbacks. Be sure to read the fine print of the agreement. There are usually three potential problems:

1. If you fail to make a payment on time, the grace period may immediately end. However, that's not all. You will more than likely be given a higher interest rate than you would get at the end of the twelve-month period. Therefore, you could be worse off than you were before you started the consolidation loan.

2. If the credit card payment does not process correctly, your payment will be considered late. The same penalties described above are applicable.

Note: It is very important that your write down and document every payment you make. Write down the day you paid, the amount you paid and the check number you used. If any problems occur, you can have the facts and figures available to dispute the late payment.

As a side note, consider using an online payment option. Online payments can be used to automatically pay your bill on a specific date. They also track what was paid and when.

3. If you go over your credit card limit, there will be problems. They range from penalties and extra fees to termination of your grace period.

If you decide to use a credit card bill consolidation loan with no collateral, be sure to make your payments on time. Ideally, you should pay as much as you can each month. This can significantly reduce your debt over the twelve-month period because all of your payment is for your debt with no interest charge. Also, don't make any additional charges on your credit card. You want to reduce your debt, not increase it.

Now that you know some pros and cons for getting a bill consolidation loan with no collateral, do your homework. It would probably be wise to talk with a debt management counselor to get an outside objective opinion.