Thomas K. McKnight - Debt Consolidation Firm in Tustin, California
What Is Debt Consolidation?
Debt consolidation describes 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, usually with more favorable payback terms-- a lower interest rate, reduced monthly payment, or both. Debt consolidation can be used as a tool to deal with student loan debt, credit card debt, and other liabilities.
How Debt Consolidation Works
Debt consolidation is the process of using different forms of financing to pay off other debts and liabilities. If you are burdened with various 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 paid off in full.
The majority of people apply via their bank, credit union, or credit card provider for a debt consolidation loan as their first step. It's a good place to start, especially if you have a great relationship and payment history with your institution. If you're turned down, 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 offered by financial institutions such as banks and credit unions, but there are various other specialized debt consolidation service companies that offer these services to the public.
An important point to note is that debt consolidation loans don't eliminate the original debt. Instead, they just transfer a consumer's loans to a different lender or kind of loan. For actual debt relief or for those that do not qualify for loans, it might be best to consider a debt settlement instead of, or along with, a debt consolidation loan.
For more information about chapter 7 and chapter 13 bankruptcy, or how to file your bankruptcy in Tustin CA, contact Thomas K McKnight LLP at (800) 466 - 7507 or visit our website at TKMLLP.com for a Free Consultation.