Neither a secured nor an unsecured debt consolidation loan will get you out of debt, but either one could help your monthly cash flow and make your finances more manageable.

There are pros and cons to both kinds of loans and it's wise to consider both before purchasing a consolidation loan.

Unsecured Debt Consolidation Loan An unsecured loan is sometimes called a signature loan, because the only thing backing it is your good name. The loan is only as good as your reputation and honor. The lender stands to lose his money if you default on the loan.

The lender assumes most of the risk with an unsecured loan, and lenders don't like taking risks. The more risk there is to the lender, the more you can expect them to charge you for the loan - and they will charge you a lot more.

You'll pay more interest, fees and penalties than with a secured loan. An unsecured debt consolidation loan will lower your monthly payments, but it does that by increasing the term of the debt (the length of time you will be paying on it).

Over the course of the loan, you'll pay more in interest over time than you would if you just kept your original debts.

You will also probably pay some hefty up-front fees, like loan origination fees. You can count on substantial late payment fees, and there may even be pre-payment penalties, so read the fine print.

The only advantage of an unsecured debt consolidation loan is that it gives you some breathing room with your monthly bills. It's definitely not an easy fix, and can be very costly.

Secured Debt Consolidation Loan Unless you have a fortune in jewels or something, you'll most likely use your home to secure a debt consolidation loan. You can use a home equity loan or you can refinance your home and use the money to consolidate your debt.

This may actually help you get out of debt and may save you money if you avoid accumulating more debt.

A secured loan lowers your monthly payment by decreasing the amount of interest you are paying. You may, however, be paying the loan off for a longer period of time than you would be paying on your existing debt. If that happens, it could mean you pay more interest in the long run.

Using a secured loan to consolidate debt means that you are taking the financial risk, not the lender. The bottom line is that you could lose your home if you default on the loan.

It's imperative that you change your spending habits immediately, avoid any future debt and make every payment on time.

When you decide to consolidate your debt, you either risk losing your home or you pay through the nose with interest and fees.

You'll want to consider all other possible options before you decide to take out either a secured or an unsecured debt consolidation loan.

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