Thomas K. McKnight - Debt Consolidation Lawyer in Irvine, CA
What Is Debt Consolidation?
Debt consolidation refers to the act of taking out a new loan to pay off other liabilities and consumer debts. Multiple debts are combined into a single, larger debt, such as a loan, generally with more favorable payoff terms-- a lower interest rate, lower monthly payment, or both. Debt consolidation can be utilized as a tool to take care of student loan debt, credit card debt, and other liabilities.
How Debt Consolidation Works
Debt consolidation is the process of using various kinds of financing to repay other debts and liabilities. If you are saddled with different forms of debt, you can apply for a loan to consolidate those debts into a single liability and pay them off. Payments are then made on the new debt until it is repaid in full.
The majority of individuals apply through their bank, credit union, or credit card provider for a debt consolidation loan as their first step. It's a good place to start, particularly if you have a good relationship and payment history with your institution. If you're turned down, try exploring private mortgage companies or lenders.
Creditors agree to do this for several reasons. Debt consolidation maximizes the probability of collecting from a debtor. These loans are typically offered by financial institutions such as banks and credit unions, however there are other specialized debt consolidation service companies that provide these services to the general public.
A vital point to note is that debt consolidation loans don't eliminate the original debt. Rather, they merely transfer a consumer's loans to a different lender or type of loan. For actual debt relief or for those who don't get approved for loans, it may be best to look into a debt settlement rather than, or together with, a debt consolidation loan.
For more information about chapter 7 and chapter 13 bankruptcy, or how to file your bankruptcy in Irvine CA, contact Thomas K McKnight LLP at (800) 466 - 7507 or visit our website at TKMLLP.com for a Free Consultation.