A Loan Consolidator Buys Up Multiple Debts

• Loan consolidation is a way for a debtor to turn multiple loans into one larger loan. Consolidators look for debtors with several loans and pay off all of the debtor's obligations, exchanging them for one loan that amounts to the sum of all the others. This means the initial lenders are paid off in full.
  
  

Consolidation Can Save the Debtor Money and Profit the Lender

• Loan consolidators specialize at finding people with multiple loans that are locked at relatively high rates and offering to consolidate the debt into one lump sum, which overall, will have lower interest payments. Consolidation can be a good option for those with several debt obligations both for the ease of only having to pay one bill instead of many and because the overall interest rate will be lower than the combined rates on the initial loans. On the other hand, the consolidator also profits from interest payments, especially if it finds clients that were locked at very high rates, and simply reduces the rates to whatever the market dictates. If the interest rates do not amount to savings being had by the debtor, there is no reason to consolidate.
  
  

Student Loans Are Often Consolidated

• Since loan consolidators are owed larger sums of money from each borrower than the original lenders, it is important for them to make sure their loans are repaid. If they were to consolidate a large amount of debt, only to have the debtor default, they would lose all their money, as well as the profits they hoped to make. For this reason, consolidating risky debt is less attractive for lenders than debt that is almost certain to be paid off, like student loan debt. Students often have large amounts of debt from education expenses, while they end school with higher earning potential to pay it off. Also, bankruptcy does not exonerate one from student debt, so the lender can be sure that its loan will not vanish due to delinquency. Consolidation is a good option for graduates, especially if interest rates have recently come down, or most of their debt is not in federal loans, which tend to have low interest rates.