Many consumers consider re-mortgaging their homes in order to eliminate credit card debts, medical bills and other high interest debts.  As an alternative, a personal loan can offer low-interest credit without a long-term payment commitment and the potential risk of a secured loan.

In most circumstances, a personal loan will have a lower interest rate than other finance options such as lines of credit, credit cards and finance company loans.  It is a medium-term credit option, giving the advantage that debts can be consolidated and paid off within a reasonable period of time.  Loans can normally be arranged for amounts ranging from a thousand dollars to fifty thousand dollars or even more.  Repayment periods are available ranging from a year to seven years, with fixed interest rates and fixed monthly repayments.

Although an unsecured personal loan for debt consolidation may carry a higher interest rate than refinancing your home, it is a far less risky option as it is not secured by your property.  If you do decide to refinance using your property, you run the risk of losing your home if you default on the payments.

When investigating personal loans for debt consolidation, you should consider whether a fixed or variable interest rate loan is best for your circumstances.  Under a variable rate loan, repayment amounts will change, making it more difficult for you to plan your finances.  However, in Australia the interest rates on variable rate loans are usually lower than on fixed rate loans, so the loan may cost you less if you can afford to take the risk of changing interest rates.  You should also ensure that you look for loan terms to suit your own budget and personal circumstances, and find out about any additional fees and charges.  It is advisable to avoid loans which have on-going charges, as well as those which have a penalty for early repayment.

Another option for debt consolidation is a loan secured on an asset other than your home, so if you have assets which might be considered suitable as collateral on a loan, you might explore this option with lenders. Alternatively, many people prefer to use a guarantor or co-signer when taking out a loan rather than putting up collateral.  This is also an option to consider if you have a poor credit history or cannot put up any security.

Most importantly, remember that there are a range of options for debt consolidation which do not include putting your home at risk.  By exploring these options you should be able to find a debt consolidation solution which is best suited to your own circumstances.