Unsecured credit card debt consolidation is the only way for many people to free themselves of debt as the amount of credit card debt the average American holds continues to grow each year. In response to maxed out credit cards, many simply open new accounts at higher interest rates, compounding the problem. The process of debt consolidation is becoming more and more transparent, and there are many ways those in debt use refinancing to their advantage to start a new debt free life.

Debt is considered unsecured because the loans have been offered with no collateral. Secured credit, such as a home mortgage, is backed by an object, a house in this example, whose value is equal to the value of the loan. Interest rates on these types of loans tend to be lower, as it is easy for the lender to recoup their investment. Unsecured debt, usually in the form of credit cards, is considered higher risk, as nothing is being offered in collateral. Since credit limits and interest rates are determined by factors such as household income, outstanding loans, and repayment history, the more debt a household has, the higher the interest rates on any further credit lines, making repayment more and more difficult.

There are two ways that most households avail themselves of unsecured debt consolidation. The first is consolidating debt with a secured loan. This can be done through refinancing an existing home loan or taking on a first or second mortgage. For those considering debt consolidation before it has had a chance to ruin credit scores, this type of debt consolidation can drop the APR rate from 25% or more to 7% or less. In addition to the ease of one monthly bill to cover all debts, this would result in both significant decreases to the monthly payments as well as a much smaller investment over the life of the loan. This loan can be borrowed through a current mortgage lender or through a company that specializes in debt consolidation services. Look online for reputable companies that will give a debt consolidation quote.

Balance transfers through individual credit cards are another option. Many major credit cards give customers the option of moving debt themselves from one credit card to another. If the holder of unsecured debt has a credit card with a low APR, this can be a good and simple option for better managing monthly bills.

The third option is taking out a special debt consolidation loan. Many companies offer unsecured debt consolidation loans to those who are battling high credit card debt. They work as a consumer advocate, buying debt from individual companies, negotiating lower payoff amounts and passing the savings on to their customers. With an unsecured debt consolidation loan, the borrower will once again only be liable for one monthly payment, and will be in a position to work with the lender to arrive at mutually agreeable terms.

For almost anyone carrying credit card debt, unsecured credit card debt consolidation is the only way to becoming debt free.