If you have several loans that you are trying to pay off, you are maybe considering adopting a debt consolidation strategy. This consists of taking a new loan that will be used to pay off all your previous debt under one payment. Ideally, a debt consolidation loan will allow you to pay lower interests. 

But you have more than one option when it comes to choosing a debt consolidation loan. Here are your options:

Personal unsecured loan

Secured loan

P2P loan


Personal unsecured loan

A personal unsecured loan is a type of loan that doesn’t require any asset as a guarantee. This means that your debt won’t be tied to any property like a car or a house, but it will be based on your credit score. 

An unsecured loan is less risky since you won’t lose any property in case you are unable to pay off your debt. And because it’s a personal loan, it doesn’t have to be related to any specific financial needs.

But because this type of loan has a lower risk for consumers, it may also come with higher interest rates. Furthermore, depending on your credit score, you may be limited in the amount you can borrow. 


Secured loan

As opposed to the unsecured loan, the secured one is tied to an asset, also called collateral. This means that you are securing your loan with property or with a savings account. Common examples of collaterals are automobiles, real estate, cash accounts, investments, insurance policies, and even valuables or collectibles.

When you secure your loan, in case you don’t repay it, the lender can take you collateral. These loans are higher risk because of the possibility of losing your asset but they usually have lower interest rates.

Depending on the value of your collateral, you can borrow higher amounts of money than with an unsecured loan. 


P2P loan

P2P stands for peer-to-peer and it refers to loans made by individuals or investors. There are several P2P websites that offer this service, matching lenders to borrowers. The process of applying for such a loan is easy and you can often get much lower interest rates. While credit score is still important for P2P loans, it is easier to obtain a loan even with a lower one.

You can get both secured and unsecured loans from a P2P lender.

The type of loan you end up choosing depends on your specific situation. If you have a valuable asset for a secured loan, that may get you a lower interest. But you need to be sure you’ll be able to pay off the loan. On the other hand, an unsecured loan doesn’t require such a guarantee so if you have a good credit score you may still be able to lock in a low-interest rate. Make sure to do your research and evaluate all the factors before making a choice.