noun. a loan made in order to consolidate several debts into one loan, usually for the purpose of reducing the monthly payments by extending them over a longer time period.

What is a debt consolidation loan and how does it work?

Debt consolidation allows you to reduce the stress of multiple payments and due dates by getting a lower, fixed-interest rate loan. The loan gives you funds to pay off the debts, so that you only have to make one monthly payment for the term of the loan.

How do you get a debt consolidation loan?

Here’s how to get a debt consolidation loan in five steps.

1. Check your credit score. Start by checking your credit score.
2. List your debts and payments.
3. Compare loan options.
4. Apply for a loan.
5. Close the loan and make payments.

What happens when you use debt consolidation?

When you consolidate your credit card debt, you are taking out a new loan. You have to repay the new loan just like any other loan. If you have multiple credit card accounts or loans, consolidation may be a way to simplify or lower payments. But, a debt consolidation loan does not erase your debt.

What is debt consolidation and what does it mean?

Consumers can use debt consolidation as a tool to deal with student loan debt, credit card debt, and other liabilities. Debt consolidation is the act of taking out a new loan to pay off other liabilities and consumer debts, generally unsecured ones.

Can a personal loan be used for debt consolidation?

Debt consolidation is the process of paying off multiple existing debts with one new loan. Although there are special loans marketed as debt consolidation loans, personal and home equity loans can be used for debt consolidation.

What to know about short term consolidation loans?

Things to remember 1 Your consolidation loan may have a longer term. That means you could end up paying more interest in the long run 2 If you consolidate short-term debt such as clothing accounts, it could take longer to pay off 3 Consolidation makes more money available. …

How does a consolidation loan work for college?

One type of consolidation loan is a student consolidation loan. In order to qualify for a student consolidation loan, you must have graduated from college. You will take all of your loans, from each year and lender and gather them into one loan. The consolidation loan will lock in the interest rate so that it does not continue to rise over time.