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Debt consolidation is the replacement of several small debts with one larger debt. There are several reasons for debt consolidation; a primary reason for debt consolidation is to restructure multiple high-interest debts into one lower-interest debt with a lower overall monthly payment. Another reason for debt consolidation is to extend the length of time of debt repayments with a new loan, thereby reducing the amount of the monthly payment. Debt consolidation can also be a way to turn variable-rate loans into a fixed rate loan. For some people the convenience of only having to service one loan as opposed to multiple loans is a sufficient reason to take out a debt consolidation loan. One of the most common sources for a low-interest debt consolidation loan is a second mortgage on a home or other real estate, although any new source of financing with a lower rate of interest than your combined current loans is a possible source of debt consolidation. |
