Unsecured Debts

Most "easy credit" is unsecured, including things like credit card balances, department store cards and service bills. If you don't make payments on whats owed, the lender has little recourse other than to apply extra fees, hire collection agencies, or use other methods to try and get what's owed.

Because the lender doesn't have any collateral to take if you default, they will on average have more "bad debts" on unsecured loans than those that are secured; and that means everyone pays higher interest rates across the board to make up for lost profits.

Because unsecured loans are charged at higher interest rates, they are usually not the best option for those trying to consolidate, as they don't knock down the interest payments enough to make for considerable savings on the balance carried.

Many people who can't qualify for a secured loan will opt for a debt settlement solution over consolidating. While it has an impact on credit, it works to the same end (often works faster than consolidation), and normally doesn't require any sort of collateral to qualify.