The term debt consolidation refers to the practice of taking out one loan in order to payoff others. In most cases, this involves taking out a secured loan (one which is collateralized by an asset such as a home) or mortgage in order to payoff unsecured debts (such as credit card debts).

The reason this may make sense is two-fold: first, the interest on home mortgage debt is generally tax-deductible, and second, the borrower will generally be able to attain a lower rate of interest on the consolidated loan, as a lender is much more apt to lend at a lower rate when the loan is secured by an asset such as a home.

In other cases, debt consolidation involves taking out one unsecured loan in order to payoff other unsecured loans. This situation is usually a bit more troublesome, as the borrower is generally in trouble, perhaps missing minimum payments on credit cards. Aggressive debtors will look to purchase your debt at a discount, and attempt to collect as much as possible from you. These debtors may be able to offer you longer payments plans and lower interest rates, but this avenue will usually damage your credit, as your original debt was not paid back in full, it was purchased by the new debtor at a discount.

Debt consolidation can be a tricky area for the unsuspecting consumer, as the market is fraught with predatory lenders who look to take advantage of your situation if you are having trouble making payments. Debt Free, LLC was formed in order to help consumers form a disciplined plan to payoff all of their debt before it gets to the point where debt consolidation is required, without damaging your credit. Click below to learn about the Debt Free Advantage plan today.

Free Debt Analysis