What Exactly Is Debt Consolidation?
Debt consolidation is, in some instances, a conversion from a number of unsecured loans into another unsecured loan with a credit institution, although it more often involves obtaining a secured loan against an asset that serves as collateral, such as a house, car or some other such piece of property.
In the simplest sense, debt consolidation generally involves paying small loans with a large one, something that is rather commonly done in the United States when a person (debtor) observes that they are having trouble managing loans they have obtained from financial institutions.
Using a large loan to pay off smaller ones can actually be arranged on your behalf by any financial institution you approach with your problems, although you are best off choosing one that you know to be well established in the industry and to have served several other people in the past like yourself. Better still, you could approach a credit counseling agency and ask them to help you out with arranging the package for a small fee. This way you can be certain that professionals are doing a professional job.
A debt consolidator will often consider collateralization of the loan, such as a mortgage secured against the house, which allows a lower interest rate than without it. As a matter o fact, this may be the biggest achievement in the entire effort – getting your interest rate lowered or even eliminated to allow for more ease in paying your loans off.
They will defer in some way to your opinion, though; although even you should know to bottle it just a bit, seeing as you got yourself in a bad position in the first place.