Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully. In recent years, reports in the media have raised concerns about the use of consolidation loans. The worry is that many people are tempted to consolidate unsecured debt into secured debt, usually secured against their home. A home buyer or builder can obtain financing (a loan) either to purchase or secure against the property from a financial institution, such as a bank or credit union, either directly or indirectly through intermediaries. The item used as collateral provides security to the lender, letting them know that they'll get their money back whether or not you're able to satisfactorily repay the loan. A government institution, usually a central bank, can lend money to financial institutions to influence their interest rates as the main tool of monetary policy.
