Debt refers to the money owed by a party to the other party the party owed is the debtor,the second party is the creditor. Therefore, Debt consolidation is a finance term referring to a form of debt repayment that entails taking one loan to pay off many others debts undertaken.
Debt consolidation refers to a process of an individuals addressing the high consumer debt referred to the country’s fiscal approach to government debt.
Debt can either be secured through collateral or unsecured, furthermore,debt consolidation process can secure a lower interest rate on the overall repayment to the entire debt amount and provide the convenience of paying only one loan to make you debt free. the amount to be repaid is always calculated as a percentage of the principal sum per year referred to as an interest rate and generally paid periodically at intervals,such as monthly,though payments vary from country to country and also between regions in a country. In business, loans are always part and parcel for it to flourish or for it to maintain its standards and earn its profits,but for this reason to manage the different loans from different institutions is difficult hence, forces the business people to consolidate their loans into one hence making its management easier and efficient in its business.
The overall lower interest rate is always an advantage of the debt consolidation loan offers consumers. Creditors also have fixed costs to process payments and repayment which may spread out over a longer period of time. However,such consolidation debts have costs: interests, points and fees where one point equals to one percent of the amount borrowed.
In other countries or regions, these loans may provide certain tax advantages. since some are secured, therefore, the lender can attempt to auction property if the borrower defaults.