The act of combining several loans or liabilities into one loan. Debt consolidation involves taking out a new loan to pay off a number of other debts. Most people who consolidate their debt usually do it to attain a lower interest rate, or the simplicity of a single loan.

Also known as a "consolidation loan".

Investopedia Says:
This is common among companies or people with credit problems (maxed-out credit cards, car loans, student loans, etc.), who combine all of their debts into one loan to create greater ease in repayment. In the case of credit card debt, this can often be advantageous because credit cards generally carry a high interest rate.

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