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, generally with more favorable payback terms-- a lower interest rate, lower monthly payment, or both. Debt consolidation can be utilized as a tool to handle student loan debt, credit card debt, and various other liabilities.
How Debt Consolidation Works
Debt consolidation is the process of using different kinds of financing to pay off other debts and liabilities. If you are saddled with different 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 paid off completely.
Most people 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 declined, try checking out private mortgage companies or lenders.
Lenders agree to do this for several reasons. Debt consolidation increases the likelihood of collecting from a borrower. These loans are generally provided by financial institutions such as banks and credit unions, but there are other specialized debt consolidation service companies that offer these services to the public.
A vital point to keep in mind is that debt consolidation loans don't eliminate the original debt. Instead, they just transfer an individual's loans to a different lender or type of loan. For actual debt relief or for those who 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 Westminster, California, contact Thomas K. McKnight LLP at (800) 466-7507 or visit our website at TKMLLP.Com for a free consultation!