Reasons to Avoid Debt Consolidation: Secured Loans, Creditor Harassment and House Repossession Many borrowers with high monthly repayments on credit card debt and personal overdrafts choose to pursue debt consolidation. However, whether a debt consolidation loan enables someone to benefit from a low APR depends upon numerous factors. Is it wise for those with bad credit to turn unsecured debts into a secured loan? Is the risk of creditor harassment and house repossession greater than the reward of lower monthly repayments? Debt consolidation may prove to be most useful for those with a good credit history as they still have access to competitive unsecured loans. Choosing Debt Consolidation and Not Closing Down Other Sources of Credit Putting all unsecured debts under one roof through debt consolidation can be a smart move for many people. Sadly, a number of borrowers that choose to consolidate debt fail to close down existing credit lines. This leads to the return of credit card debt and personal overdraft limits being used up again. Failing to follow the right approach when chooseing debt consolidation can serve to worsen family finances. Debt Consolidation and Bad Credit It is almost always a bad strategy for those with bad credit to take out a debt consolidation unsecured loan. Mainstream lenders won’t be interested which means that only doorstep lenders and loan sharks will be willing to lend money. Such lenders charge 50-60% on unsecured loans meaning that consolidating debt to achieve a low APR isn’t a likely scenario. Secured Loans and Debt Consolidation Having bad credit normally means that unsecured loans aren’t a realistic option due to the high APR. This means that many borrowers that are seeking debt consolidation opt for secured loans. Is it really a sensible idea to turn unsecured debt, such as credit card debt, small unsecured loans and personal overdrafts, into a secured loan? Secured Debt Consolidation and Creditor Harassment A secured loan provides collateral for a lender, providing it with far greater powers to recover debt in the event of loan default. It can lead to creditor harassment for up to 12 years in event of house repossession and resultant negative equity. Rather than get a secured loan, commencing a debt solution could prove to be a more effective alternative. Whilst debt consolidation has too many negatives for those with bad credit, it could prove a useful option for those seeking to protect a good credit rating. Those that do have bad credit may be better served by choosing a debt solution, such as an Individual Voluntary Arrangement or debt management plan. Those that found this article useful may also be interested in reading about the pros and cons of secured loans and avoiding loan sharks.