Debt consolidation entails the act of taking out one loan to pay off many other loans. This is usually done to secure a lower interest rate, to secure a fixed interest rate or for the convenience of servicing or repaying only one loan instead of many.
Debt consolidation can be from a number of unsecured loans (such as credit cards) into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, which is most commonly a house. In this case, a mortgage is secured against the house. The collateralization of the loan allows for a lower interest rate. By collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. In this case the risk to the lender is reduced so therefore the interest rate offered is often lower.
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