If you are among the many individual struggling with debt there are a lot of companies who provide consolidation services. As such these types of loans are demanded by a lot of people having the same type of problems.
Basically, they can help ease the obligations of the borrower. Consolidation can extend the life of the loan, lower the interest rate, and make it so you only have one payment to make. Of course none of this is a guarantee as each loan is different.
It is common for lenders to want a consolidation loan to be backed by a mortgage, although that is not always the case. If a lender does get the loan secured by a mortgage they will be better protected in the event of default.
After the loan has been secured it is common for the lending company to contact all the other lending companies to negotiate a payment. It is not uncommon for the lending companies to offer some type of financial advice to the troubled borrowers.
Basically a consolidation loan may be regarded as a form of debt refinancing. From this point forward the other lenders would have been paid or settled by the new lending company and there will only be one loan outstanding.
Here is something to keep in mind:
Most consolidation loans are secured to your home meaning if you default your home may be at risk.
Consolidating your debts into one loan is an excellent option to consider for many people having financial troubles. Consolidating your loans into one should be considered if you keep getting late fees and penalties due to non payment.
