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Debt Glossary - Consolidation Loan
A consolidation loan allows a borrower to combine a number of existing debts into one loan. Consolidation loans are used to reduce interest payments and/or lower monthly repayments. By using a loan to consolidate their debts a person can hope to pay off what they owe in a shorter period of time while at the same reducing the threat of bankruptcy.
Consolidation loans are generally inappropriate for people who have already taken out multiple consolidation loans in the past and for people looking to move debts from credit and store cards so that they can start using the cards again.
Other methods for consolidating debts include Individual Voluntary Arrangements (IVA's) and Debt Management Plans.
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