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Debt consolidation - Wikipedia, the encyclopedia var skin="monobook", stylepath="/skins-1.
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(March 2008) Personal finance Credit and Debt Credit card Credit union Debit card Debt consolidation Loan Moneylender Mortgage Pawnbroker Employment contract Salary Wage Paycheck Employee stock options benefit Direct Retirement Retirement plan Pension Social security Business plan Corporate action Personal budget Financial planner Financial adviser Estate planning Finance series Financial markets Financial market participants Corporate finance Personal finance Public finance Banks and Banking Financial regulation edit this box Debt consolidation entails out one to pay off many others.
This is often done to secure a lower interest rate, secure a fixed interest rate or for convenience servicing only one loan.
Debt consolidation can simply from number of unsecured into another unsecured loan, but more often it involves a loan an asset that serves as collateral, most commonly a house.
In this case, a mortgage is secured against the The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees allow forced (foreclosure) of the asset to pay back the loan.
The risk to the lender is reduced so interest rate offered is lower.
Sometimes, debt consolidation companies can discount the amount of the loan.
When the debtor is in danger of the debt consolidator will buy the loan at a discount.
A prudent debtor can shop around for consolidators who will along some of the savings.
Consolidation can affect the ability of the debtor to debts in so the decision to consolidate must be weighed carefully.
Debt consolidation is often advisable in theory when someone is paying card debt.
Credit cards can carry a much larger interest than even an unsecured loan from a bank.
Debtors with property such as a home or car