What is debt consolidation?
Debt Consolidation is a very popular strategy used by consumers to better manage their debt problems. It is use of a home equity loan where members move high-rate credit card balances to low rate home equity loans. By taking a credit card with an 18% interest rate and moving it to a home equity line with an 8 or 9% interest rate, a member could save thousands of dollars. The commercials on television make it sound like a debt consolidation loan will solve all my financial problems. Are these loans really the perfect way to solve my debt issues? For some people debt consolidation loans can work very well. For others they may come with some side effects.
Debt consolidation does not involve loans, instead it involves working with a debt repayment representative that will help you combine all of your debts, lowering your interest rates and lowering your overall monthly expense. We will work with your creditors to lower interest rates and even reduce your charges, allowing for you to pay back the funds more quickly than you might have been able to on your own.
Debt consolidation means taking out one loan to pay off many others. Debt consolidation can help you secure a lower interest rate, secure a fixed interest rate or for the servicing of only one loan. Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but in most cases it involves a secured loan against collateral, e.g. a house. In this case, a mortgage is secured against the house. The collateralization of the loan allows a lower fee than without it, because in this case, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan.
