Clift Mortgage
   

Debt Consolidation

Debt consolidation entails taking out financing to pay off multiple financial obligations. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one bill.

Debt consolidation can simply be from a number of unsecured obligations into another unsecured financing, but more often it involves a secured financing against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house. The collateralization of the financing allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale of the asset to pay back the obligation. The risk to the lender is reduced so the interest rate offered is lower.

Sometimes, debt consolidation companies can discount the amount of the obligation. When the debtor is in danger of bankruptcy, the debt consolidator will buy the debt at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.

Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral. Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest.


This material is not from HUD or FHA and has not been approved by HUD or any government agency. Equal Housing Opportunity Lender

Clift Enterprises Inc.
CL-68323

360-683-4848 office
803 Carlsborg Rd., Suite C, Sequim, WA 98382

360-457-7654 office
330 E. 1st St., Ste 3, Port Angeles, WA. 98362

Copyright © 2016 Clift Mortgage. All rights reserved.

Site Designed and Maintained by:
Dumah Technologies