Question 10
People sometimes use the words “consolidation” and “refinancing” interchangeably, but they describe different approaches. Consolidation usually refers to taking multiple existing debts (for example several credit cards and a personal loan) and combining them into a single new loan or line with one monthly payment — its main benefits are simpler management and possibly a longer term or lower payment. Refinancing generally refers to replacing a single loan (like a car loan or mortgage) with a new loan that has different terms (rate, term), often to lower the interest rate or change the monthly payment structure. Both can lower monthly payments or interest costs but have different impacts on repayment speed, total interest, and how lenders view your credit profile. The question asks you to recognize the primary difference between the two.
Which statement best describes debt consolidation compared with refinancing?
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By Wise Wallet
Regularly checking your credit report makes it easier to spot errors or identity theft before they cause bigger problems.