Thomas K. McKnight - Debt Consolidation Lawyer in Santa Ana
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, typically with more favorable payoff terms-- a reduced interest rate, lower monthly payment, or both. Debt consolidation can be utilized as a tool to manage student loan debt, credit card debt, and 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 through their bank, credit union, or credit card company 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 declined, try checking out private mortgage companies or lenders.
Creditors are willing to do this for several reasons. Debt consolidation maximizes the likelihood of collecting from a debtor. These loans are generally offered by financial institutions such as banks and credit unions, but there are other specialized debt consolidation service companies that offer these services to the general public.
An important point to note is that debt consolidation loans do not eliminate the original debt. Rather, they just transfer an individual's loans to a different lender or type of loan. For actual debt relief or for those who do not get approved for loans, it may be best to consider a debt settlement instead of, or in conjunction with, a debt consolidation loan.
