Debt consolidation is taking out a bigger loan to pay back a number of other debts. Why would someone possibly pay back debt by incurring bigger debt? You can get better terms on the loan. Better terms meaning, a smaller interest rate or lower monthly payments. In some cases, it’s a better option to have 1 debt to keep track of instead of multiple smaller ones, each with their own unique interest rates. Debt consolidation loans come in either secured or unsecured variants. Secured means the loan requires collateral while an unsecured doesn’t, but they are harder to acquire.

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