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Consolidated Loan
A consolidated loan is a specialty loan acquired for the purpose of reducing debt. By paying off individual creditors and moving the total amount owed into a single debt, one loan payment is made per month reducing the overall debt by removing multiple interest payments.
Often times loan consolidation is in response to a specific set of debts incurred for a life goal. For instance, many young people are saddled with multiple student loan payments. As long as these debts are allowed to exist separately, the chances that the individual will be able to pay them off are slim. By rolling all the debts into one, however, the single loan payment goes farther in whittling down both principle and interest.
When an individual qualifies for a consolidation loan, the lender pays off the balances of all outstanding accounts, outlines new repayment terms, and sets a schedule of monthly payments according to an agreed upon interest rate.
More terms explained
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