What Is Debt Consolidation?
Debt consolidation describes the act of taking out a new loan to repay other liabilities and consumer debts. Multiple debts are combined into a single, larger debt, such as a loan, typically with more favorable payback terms-- a lower interest rate, reduced monthly payment, or both. Debt consolidation can be utilized as a resource to take care of student loan debt, credit card debt, and various other liabilities.
How Debt Consolidation Works
Debt consolidation is the process of using various forms of financing to repay other debts and liabilities. If you are burdened with various types 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 completely.
Most consumers apply through their bank, credit union, or credit card company for a debt consolidation loan as their first step. It's a good place to start, especially if you have a good relationship and repayment history with your institution. If you're denied, try looking into private mortgage companies or lenders.
Creditors agree to do this for several reasons. Debt consolidation maximizes the likelihood of collecting from a borrower. These loans are usually provided by financial institutions such as banks and credit unions, however there are other specialized debt consolidation service companies that offer these services to the general public.
A vital point to note is that debt consolidation loans do not erase the original debt. Instead, they simply transfer a consumer's loans to a different lender or kind of loan. For actual debt relief or for those that do not get approved for loans, it may be best to consider a debt settlement instead of, or along with, a debt consolidation loan.
For More Information About Debt Consolidation in Newport Beach, California, Contact Thomas K. McKnight LLP At (800) 466 - 7507 or Visit Our Website at TKMLLP.Com for a Free Consultation!