The advertisements on television and radio seem ubiquitous, suggesting that if you have too much debt, all you need to do is use debt consolidation to end your financial troubles. Getting out of heavy debt is more complicated than simply taking out a loan, as you actually have to repay your debt to get out of trouble. The right consolidation loan can make it easier to repay bills, as you will have only one monthly payment, but the wrong loan can cost you more money.

There are two ways to borrow money to consolidate your debt; each has its good and bad points. An unsecured loan can be used to repay debt and a secured loan, which must have collateral, can be used as well.

A secured loan is probably the most commonly used tool to combine bills, using collateral that offers a bit of a guarantee to the financial institution that you will repay. The most frequently used types of collateral are homes and vehicles; it's easy to establish a market value for them and they can sell easily should you default on your payments. As a benefit for providing collateral, you do receive some positives - you can likely borrow more money than you could with an unsecured loan, and the interest rate that you pay will almost certainly be more affordable.

An unsecured loan needs no security; the bank or a credit union simply lends you the money in exchange for a promise to repay. An advantage for the borrower would be that there is no inherent risk of losing property, such as a house, should she default on the loan. Unsecured financing comes with a cost, as the rates are likely to be quite a bit higher than for secured loans. An unsecured loan can be harder to obtain than a secured one, particularly if your credit is poor.

For the great majority of borrowers, secured financing generates the best leverage towards retiring a heap of debts. Borrowers can get the best loan by applying for secured financing. The offer of security to the lender goes a long way towards receiving a favorable interest rate. As the rates are higher, trying to consolidate debt with more unsecured debt might leave the cconsumer just going nowhere. If you are not sure as to what might work best for you, consult with a bank or a credit union.