The goal of a debt consolidation loan is to consolidate various higher-interest balances into one easier-to-manage, less-costly debt.

Advantages:

• Consolidation loans allow consumers to make a single payment on one loan once a month, instead of paying multiple creditors, charging different rates at different times.
• Consolidating debts may allow consumers to secure a lower interest rate.

Disadvantages:

• Many consumers seeking consolidation loans do not have the credit to obtain the lower interest rates available.
• If a consumer has a home to secure to the loan, they can obtain a lower interest rate; however, they risk losing their homes if they cannot make payments.
• Due to the longer period of time it takes to pay off a consolidation loan, many consumers end up paying more in the long-term.