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Debt Consolidation is the process of taking smaller loans or credit card debt and putting these obligations together into a larger, consolidated loan. Debt consolidation allows the borrower to lower their total cost of credit by leveraging the lower interest rates and administrative costs associated with a larger loan.
The debt consolidation process usually involves taking unsecured loans such as credit card debt and turning them into a secured loan such as a second mortgage on a home. This means that creditors have a legal claim to the home if the individual should default on the loan through a pattern of non-payment. Consolidation loans provide the individual with tax advantages that are not available with other kinds of credit payments.
Debt consolidation is an alternative to other debt reduction or elimination choices such as budgeting, bankruptcy, debt negotiation or seeking the help of a debt counselor.
Other forms of this term include -consolidate debt |
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