A bill consolidation loan will reduce my monthly expenses, but my bank wants collateral. Why?
Bill consolidation is a frequent reason for loan requests. Many people have several credit cards and other debts which are unsecured. By combining these into one debt the interest paid can be lower, the new monthly payment is lower and there is only one payment to make.
The problem is that the consolidation places all this debt on one lending institution instead of several. That institution is taking more risk than all the others. They want collateral to secure the debt to help mitigate this risk. In this loan your position improves, but the lender's does not. That is why collateral is needed. A lender may accept tangible collateral such as a vehicle, or even a co-signer who will stand with you to make the payments if needed.
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Bill consolidation is a frequent reason for loan requests. Many people have several credit cards and other debts which are unsecured. By combining these into one debt the interest paid can be lower, the new monthly payment is lower and there is only one payment to make. 