A debt consolidation loan is a single loan (generally from a financial institution) that allows you to repay your debts to several or all of your creditors at once.
You must ask your financial institution for a loan equal to the amount of your total outstanding debts that are currently due.
In most cases, the financial institution will settle all the debts for you and, in return, the only monthly payment you will have to make will be to them.
Contact several financial institutions before you choose a consolidation loan since the interest rates offered by competing financial institutions may vary.
This option may be suitable for debts such as those relating to credit cards, public utilities or other consumer loans.
However, not all debts can be combined into a consolidation loan — a mortgage cannot be included, for example.
Your financial institution will be able to tell you which of your debts you will be able to pay off with the loan that they grant you.In order to qualify for a consolidation loan, a consumer usually needs to have an acceptable credit rating and sufficient income to demonstrate that they will be able to manage the loan (that is to say, to demonstrate they will be able to make the monthly consolidation payment, in addition to paying for their regular monthly bills and expenses). A blemished credit rating will likely diminish your ability to secure a consolidation loan, therefore it is best to act as soon as possible (please refer to Credit and Credit Repair for more information).It does not cost anything to apply for a loan in order to consolidate all your debts. Inquire at the financial institution that you choose.Although this option may help you save on interest charges, you still have a combined debt, which represents the total of your old debts.If you are not careful, and you still have access to your accounts and credit cards, there is a chance that you will be tempted to use them, therefore go further into debt. You have the chance to maintain a good credit rating if you act quickly.Furthermore, you will only have to make a single monthly payment to your financial institution, instead of making several monthly payments to various creditors.