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Debt Consolidation Definition Debt consolidation is the process of combining many debts into a single debt, usually resulting in lower monthly payments. Monthly payments are easier to make with a consolidated debt because the payment is lower than the total of payment with multiple debts and there is only one creditor to pay. Debt consolidation is also called a consolidation loan, though loans are not the same thing. See Consolidation vs. Loans to learn the difference. Debt consolidation helps consumers with an average unsecured debt of $5,000. Unsecured debts include credit card accounts, medical bills, service charges, personal loans, signature loans, store credit or charge accounts, gas charge accounts and certain installment loans. Paying off a number of higher interest rate loans or credit cards by taking out a single loan for a lower monthly payment is the most common use of a debt consolidation loan. There are many debt consolidation firms, though some are not as reputable as others. Choosing the right firm is of the utmost importance, as some firms use dishonest tactics in their consolidation loans. |