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, generally with more favorable payoff terms-- a lower interest rate, reduced monthly payment, or both. Debt consolidation can be utilized 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 kinds of financing to repay other debts and liabilities. If you are saddled with various kinds 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 individuals 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, particularly if you have a great relationship and payment record with your institution. If you're denied, try checking out private mortgage companies or lenders.
Creditors are willing to do this for a number of reasons. Debt consolidation maximizes the probability of collecting from a debtor. These loans are generally provided 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 do not eliminate the original debt. Instead, they simply transfer an individual's loans to a different lender or type of loan. For actual debt relief or for those who don't qualify for loans, it might be best to look into a debt settlement instead of, or together with, a debt consolidation loan.
For more information about a Debt Consolidation Lawyer in Anaheim, California, contact Thomas K. McKnight LLP at (800) 466-7507 or visit our website at TKMLLP.Com for a free consultation!