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Owning a property has many implications when applying for a loan. All of the borrower's assets act as a guarantee of his obligations. Any debt that is due and unpaid can be subject to a legal claim and the borrower's assets can be sold in order to repay the debt as ordered by a judge.
What is the benefit of using your home as collateral then? The fact that a specific asset is chosen to secure a loan implies that the lender has privileges over that property if another creditor wants to get paid by forcing the borrower to sell the asset. Moreover, the debt follows the property so if the property would be sold, the new owner would be obliged to repay the loan or risk repossession.
As you can see, secured loans provide extra safety for the lender which is the main reason why the interest rate charged for these loans is considerably lower. Nevertheless, the sole possession of a house, even if you don't use it as collateral for the loan, provides the lender with more safety as regards repayment. If it can't get you better loan conditions, at least, it will increase your chances of getting approved.
That being said, homeowners can almost always get a consolidation loan. If they can't obtain an unsecured consolidation loan due to their bad credit, they can always request a secured consolidation loan and the chances of being approved will be a lot higher. As stated before, unless not possible, it is always advisable to request a secured loan. If you will be able to repay the loan, you won't have to fear repossession and if you doubt you'll be able to repay he loan you shouldn't be requesting one.
Ownership, however, won't guarantee approval by itself. There are other requirements you need to meet in order to get approved for a debt consolidation loan. For starters, you need to prove you have a steady job and by "steady", lenders mean that you will be required to prove that you have been working with the same employer for at least two years. If you don't have a job, you need to show some other source of income.
The income will also be analyzed because the lender has to be sure that the loan payments won't exceed a certain proportion of your income (Usually around 30%). If your income is $1000 and your loan installments $400, chances are you won't get approved unless you extend the loan length so the installments are reduced at least to $300.
Your credit score will also determine approval. Even if you can get approved with bad credit, there are some delinquencies that if present in your credit report may affect your chances. For example, a bankruptcy within a two years period of time will probably imply you'll get declined for a loan. A recent default may also imply you get rejected. Other minor delinquencies will only imply a higher interest rate, unless of course there are too many of them in the recent past.
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