Debt Consolidation is basically the practice of taking out one loan to cover all of your outstanding debts. Instead of settling with each creditor separately, debt consolidation companies will generally pay off the debts you wish to consolidate, leaving you with one payment to make as opposed to many payments to make. The main risk with debt consolidation is finding a company that is reputable. Some debt consolidators will purchase outstanding debts from creditors at a discount.
The better ones will pass some of the savings along to the borrower. It is also risky to convert unsecured debts (like credit cards) into secured debts (like a mortgage). While it may seem attractive to many borrowers, these loans end up costing more money over time - if a typical mortgage lasts 30 years, the debts consolidated into that mortgage are paid off over that time period while interest accrues. Consolidation loans replace one debt with another; they are inherently unsustainable. Debt consolidation is the financial equivalent of kicking a can down the road.
If you are in a similar situation and could use some help, contact us today online or by telephone at (312) 313-1613 to speak with an experienced Chicago bankruptcy attorney.