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Debt Consolidation – How it Works

Debt Consolidation

Debt Consolidation

Every day I hear ads for debt consolidation. I was always curious how these loans are able to take existing interest debt and turn it into a lower payment. The primary way debt consolidation programs work is by transferring unsecured debt into secured debt. Which brings up the next question, what are the difference between the two? An unsecured debt does not have an underlying asset associated with it. A good example is a credit card. Usually, there isn’t a specific asset that you own tied to the credit card. An example of a secured debt is a home mortgage. If you don’t pay back the mortgage the bank can take possession of the home (secured asset).

Lenders are usually able to offer a lower rates since the debt is now secured with an asset. There is less risk to the lender.

Additionally, programs can do things like extend the term of your loans to increase the payback period and decrease the monthly payment. This makes it easier to meet your monthly payment. Many debt consolidation experts have the ability to work with multiple lenders. This can save a great deal of time and frustration as these agents are experts and can navigate the maze of creditors while minimizing payment.

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8 Responses to “Debt Consolidation – How it Works”

  1. Consolidation Debt Help» Debt Consolidation - How it Works | Money and Minds says:

    […] to source: Debt Consolidation – How it Works | Money and Minds Related Reading from Amazon: Nonprofit Debt Consolidation Secrets Exposed! How You Can Beat the […]

  2. Johanne says:

    Nice post – debt consolidation in simple terms.

  3. ACHAVA says:

    Am after a loan but am very sceptical these days, there are a lot of sharks out there, can you point me to an article that explains all the different types of loans please? Thank you 😀

  4. Credit Answers says:

    Nice summary of debt consolidation. People shopuld note that not everyone can qualify for a consolidation loan. People should really check out all of the options available to them.

  5. loan modification says:

    Be aware that not everybody qualifies for loan modification though. Usually the reason you need a professional is that they know how to negotiate. You can do that on your own – since there is no license required for modifying your loan -, but do your research first.

    It’s like doing your taxes. You can do that ,but how many people do it on their own?

  6. loan modification help says:

    Now this is the time than you can actually negotiate with your credit card company and they most likely will help you out.

  7. Chris says:

    Debt is the biggest issue facing us all.
    I found this video on YouTube which really opened my eyes to the importance of getting out of debt: http://www.youtube.com/watch?v=50bWUrKAbwU
    I am sure you will be as amazed as I was.

  8. Oleg says:

    Very informative post. I think you could earn nice money with your blog just writing reviews in it. I personally invite you to linkfromblog. com. This is a great place created for bloggers to help them in earning money without paying any commission just for writing reviews. Good luck.

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