What Is a Consolidation Loan?

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A consolidation loan can be used by a person to help make payments on their home, but failure to do so can result in that person losing their home. Discover how people use consolidation loans to pay off credit card debt with help from the owner of a debt negotiation company in this free video on debt and money management.

Part of the Video Series: Debt Consolidation & Management
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Video Transcript

`Hi, my name is Peter Repak, I'm the owner of Clear Financial, LLC, a debt negotiation company. What is a consolidation loan? Well, a consolidation loan is a pretty interesting thing. Why? Because what you do is you take money on something that you own. You have your house, let's say, and you do a second mortgage or you pick up a consolidation loan and you pay off your credit cards off of it. Credit cards are unsecured, meaning, if you don't pay them, if you fall behind, they really can't do too much to you until you go into legal proceedings. However, if you fall behind on your house, guess what? Your house is going to be in jeopardy. Your house can be lost. So banks like to do that. Here's the reason why. Credit cards, themselves, you get a piece of plastic, you go out, you purchase something on it, you pay interest on it. The money really is only on a plastic, it's not really a concrete block, it's not really something that you can really touch, and nothing that they really can take away from you. Credit card companies are not going to take away your furniture that the dog peed on, or something like that. They simply don't have the manpower, neither do they want to have a huge warehouse to put it in and then sell it. So the likability that they're actually going to take anything away from you if you're going to fall behind on your credit card debts, that's very highly unlikely. However, if it goes into your house and you pick up a loan on top of your house, you fall behind on that one, they take away your house, it's not really a good thing to do. Rare occasions it is a good option, but very, very rarely. My name is Peter Repak, I'm the owner of Clear Financial, LLC, thank you for watching.


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