Debt Consolidation loans come in the form of a
mortgage. The bank increases your
bond, pays off your
debt leaving you with one lonely loan, with one lonely debt repayment and one lonely creditor. While this looks great on your credit history, helps you financially and means lower interest rates on your debt, it sucks for those who don’t own property, mostly because they can’t have it.
The problem however is not so much whether you own a home or not, but rather what collateral you have as surety, and nothing quite says responsible or valuable quite like a home. The idea though is that
debt consolidation is usually reserved for those who have debt big enough to buy a house. All that debt must have lead to some kind of asset that can act as collateral.
If you don’t own a home, a property (or land) will suffice, or other equity worth significant value (that is, the value of the loan). If there is not much in the form of assets to cover your loan, you can get someone to co-sign on the debt consolidation loan for you. This person must have enough value in the form of assets to exceed the amount of the loan. Because this person’s assets will take the place of your collateral (that is, their equity can be repossessed to pay off your loan), it will most likely be a relative, or someone who has a genetic obligation to love you.
If you have a life
insurance policy, even more specifically, a Whole Life insurance policy, you can apply for a consolidation loan. Such a policy builds up interest and value over time (like a savings account). Money can be borrowed from this policy, depending on the amount. If this policy is more than 10 years old and you’ve been paying it consistently, then it can be used as collateral.
Assets that can be used as surety include bonds, stock, vehicles, valuable art or collectibles. Any asset that has a monetary value associated with it can act as collateral, as long as the value exceeds the amount of the loan.