Debt consolidation is the process of taking out a loan to pay off several other loans. People often consolidate debt to attain a lower interest rate or for the benefit of only needing to deal with one loan. Debt consolidation can involve rolling several unsecured loans into one secured by an asset, often a house. By securing the loan, the debtor can receive a lower interest rate since the loan is less of a risk to the lender.
Debt consolidation is often suggested for debtors with large amounts of credit card debt since credit cards can carry such high interest rates, larger than some unsecured bank loans.
Categories:
