In any form of lending, there is always some risk involved. The risk is usually on both the parties. Variations can only be on the extent of risks but at all times both parties face risks. This applies to both secured and unsecured loans. We are more interested with unsecured loans because it is in this category that a majority of us fall. Almost all of us qualify. For secured loans you must have the security.

So, when someone is asking for an unsecured loan say credit card. The risk is usually higher on the lender. Since there is no collateral, it is likely that when payments are not made they will lose. So, when someone opts for debt consolidation they will be happy with it. The risk will be less for them.

The borrower then faces the risk of losing their property if they do not make payments. Usually, the amount in question will be equal the property attached. So when they default, they will risk losing it. Maybe the property they also acquired through a loan where they paid dearly as well.

So, when the debt is secured, the borrower is likely to be more disciplined. When there is no security and debt settlement is sought, the lender will usually agree because they also don’t want to lose everything. Even 50% of the payment will be taken and the rest written off.