Editing Debt consolidation (section)

==Overview==
{{Further|Consumer debt}}
Debt generally refers to [[money]] owed by one party, the [[debtor]], to a second party, the [[creditor]]. It is generally subject to repayments of [[Principal (finance)|principal]] and interest.<ref>{{cite web|url=http://www.investopedia.com/terms/d/debt.asp|title=Debt Definition|publisher=Investopedia|access-date=16 May 2012}}</ref> [[Interest]] is the fee charged by the creditor to the debtor, generally calculated as a percentage of the principal sum per year known as an [[interest rate]] and generally paid periodically at intervals, such as monthly. Debt can be [[Secured loan|secured]] with [[collateral (finance)|collateral]] or [[Unsecured debt|unsecured]].

Although there is variation from country to country and even in regions within country, consumer debt is primarily made up of [[home loans]], [[credit card debt]] and [[car finance|car loans]]. [[Household debt]] is the consumer debt of the adults in the household plus the [[mortgage]], if applicable. In many countries, especially the United States and the United Kingdom, [[student loan]]s can be a significant portion of debt but are usually regulated differently than other debt.<ref name=Studentloands>{{cite news|last1=Rowan|first1=Rachel|title=Student Loans Around the Globe|url=https://www.tuition.io/blog/2013/06/student-loans-around-the-globe/|access-date=21 December 2014|work=Tuition.io - Student Loan|date=June 7, 2013|archive-date=21 December 2016|archive-url=https://web.archive.org/web/20161221084959/https://www.tuition.io/blog/2013/06/student-loans-around-the-globe/|url-status=dead}}</ref> The overall debt can reach the point where a debtor is in danger of [[bankruptcy]], [[insolvency]], or other fiscal emergency.<ref name="VittMacBean2003">{{cite book|author1=Lois A. Vitt|author2=E. Craig MacBean|author3=Jürg K. Siegenthaler|author4=Institute for Socio-Financial Studies|title=Encyclopedia of Retirement and Finance|url=https://books.google.com/books?id=lc3zy80-h_AC&pg=PA37|access-date=13 December 2011|date=30 November 2003|publisher=Greenwood Publishing Group|isbn=978-0-313-32834-3|pages=37–}}</ref> Options available to overburdened debtors include [[credit counseling]] and [[personal bankruptcy]].

Other consumer options include:
*[[debt settlement]], where an individual's debt is negotiated to a lesser interest rate or principal with the creditors to lessen the overall burden;
*[[debt relief]], where part or whole of an individual debt is forgiven; and 
*debt consolidation, where the individual is able to acquit the current debts by taking out a new [[loan]].<ref>{{cite web|url=https://samedayloans365.org/guides/how-does-debt-consolidation-work-dos-and-donts/|title=How Does Debt Consolidation Work: Do's and Don'ts|publisher=SDL365 Financial Choice|access-date=18 June 2019}}</ref>
Sometimes the solution includes some of each of these tactics.<ref name=FTC>{{cite web|last1=Staff writer|title=Coping with Debt|url=http://www.consumer.ftc.gov/articles/0150-coping-debt|website=FEDERAL TRADE COMMISSION|publisher=US Government|access-date=21 December 2014}}</ref>

===Process===
The bulk of the consumer debt, especially that with a high interest, is repaid by a new loan. Most debt consolidation loans are offered from [[Financial institution|lending institutions]] and secured as a [[second mortgage]] or [[home equity line of credit]].<ref name=FTC /> These require the individual to put up a home as [[collateral (finance)|collateral]] and the loan to be less than the [[equity (finance)|equity]] available.

The overall lower interest rate is an advantage that debt consolidation loan offers to consumers. Lenders have fixed costs to process payments and repayment can spread out over a larger period. However, such consolidation loans have costs: fees, interest, and "points" where one point equals to one percent of the amount borrowed. In some countries, these loans may provide certain tax advantages.<ref name=Foxtaxbreaks>{{cite news|last1=Detweiller|first1=Gerri|title=Congress Extends Tax Break for Troubled Homeowners, But Headaches Aren't Over|url=http://www.foxbusiness.com/personal-finance/2014/12/18/congress-extends-tax-break-for-troubled-homeowners-but-headaches-arent-over/|access-date=21 December 2014|work=Fox Business News|date=December 14, 2014}}</ref> Because they are secured, a lender can attempt to seize property if the borrower goes into [[default (finance)|default]].

Personal loans comprise another form of debt consolidation loan. Individuals can issue debtors a [[personal loan]] that satisfies the outstanding debt and creates a new one on their own terms. These loans, often unsecured, are based on the personal relationship rather than collateral.

In United States, there are certain companies and private law firms addressed as debt relief companies and/or debt consolidation companies that provide professional debt consolidation services. A consumer can approach them for debt help and make only one monthly payment to them. This payment will then be disbursed by these companies among the various creditors the consumer is indebted to.
Many other countries, alongside the United States, also have such professional services for the benefit of consumers struggling with [[household debt]]. {{citation needed|date=April 2019}}