What financial action does a wraparound loan allow borrowers to take?

A wraparound loan is a type of financing that allows borrowers to secure additional funding by "wrapping" a new loan around an existing one. This approach enables the borrower to obtain a new loan that includes the amount of the existing loan, allowing them access to funds without having to pay off the original loan first. It can be particularly beneficial for those who may not qualify for traditional financing or may want to avoid the complexities of refinancing an existing mortgage.

This financial mechanism is particularly useful in scenarios where the original loan may have favorable terms that the borrower would prefer to maintain while still accessing additional capital. It means the borrower can manage both loans under a single payment structure, effectively leveraging existing debt for new financial opportunities.