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Debt Consolidation
       
 
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Debt Consolidation

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Debt Consolidation
Using the proceeds of a new loan to pay off one or more existing loans.
    
Usually done when the client has trouble meeting their existing obligations and is able to lower their monthly payment with another more favorable loan. Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as Collateral, most commonly a house. In this case, a mortgage is secured against the house. The collateralization of the loan allows a lower Interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. The Risk to the lender is reduced so the Interest rate offered is lower.
    
Sometimes, Debt consolidation companies can Discount the amount of the loan. When the debtor is in danger of Bankruptcy, the Debt consolidator Will buy the loan at a Discount. A prudent debtor can shop around for consolidators who Will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in Bankruptcy, so the decision to consolidate must be weighed carefully.
Posted by  Opal Financial Group
 
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