Debt and bill consolidation is the practice of paying off many loans with one loan. This is undertaken by debtors for lowering their interest rates on loans and to enjoy the convenience of making a single monthly bill payment than multiple ones. Multiple bill payments increase the chances of missing a payment, which could adversely affect ones credit score. Sometimes, debtors take one loan to pay off multiple loans with the intention of locking in a fixed interest rate.
The debtor secures a lower interest rate through debt and bill consolidation by paying off unsecured loans, like credit card balances, with a secured loan, like a loan on the house. Since secured loans are less risky for the lending agency, the debtor gets charged a lower interest rate. There can be sizeable gains from reduced interest rates, since credit card interest rates are substantially higher than mortgage interest rates.
Debt and bill consolidation is normally resorted to by people who have used their credit cards considerably above what their current income levels permit them. Students also consolidate their student loans to lower their interest rates and improve their credit rating....
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