Debt consolidation is to borrow money to repay all debts. It lowers monthly payments needed to repay debts through a new due date which can be combined with a lower interest rate. The debtor has a single monthly payment and retain all its property. This solution has the advantage of avoiding bankruptcy.
By cons, there is one last chance and the person must have a credit quality sufficient to qualify for obtaining the loan required to consolidate. In general, a financial institution is prepared to grant a loan to consolidate or if the following conditions are met:
- Presence of free assets that can secure the loan as equity on a large residence, which will secure the loan through a mortgage of 1st or 2nd row
- The ratio of payments on debts and liabilities is less than 35% of gross revenues
- A guarantee provided by the bond of a solvent individual.
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