Thomas K. McKnight - Debt Consolidation in Orange County, California.
What is Debt Consolidation?
Debt consolidation refers to 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 payback terms-- a reduced interest rate, reduced monthly payment, or both. Debt consolidation can be used as a tool 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 different forms of financing to pay off other debts and liabilities. If you are burdened with different 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 in full.
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 history with your institution. If you're turned down, try exploring 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 borrower. These loans are generally 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 public.
An important point to remember is that debt consolidation loans do not 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 get approved for loans, it might be best to look into a debt settlement rather than, or in addition to, a debt consolidation loan.
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