What is a Consolidation Loan?

July 20, 2025

A consolidation loan is just like any other personal loan but is designed to help you tidy up your debts.

Instead of having lots of different bills to pay, you roll them into one simple loan.

How Does It Work?

You may have money to pay on:

A consolidation loan is just a personal loan you use to pay these off.

After that, as long as you have paid off your existing debts, you only make one payment each month.

Having lots of debts can feel stressful and it can cost a lot in interest.

A consolidation loan can help by:

Making payments easier to manage, usually by reducing how much you pay each month
Helping you remember just one due date
Sometimes lowering how much interest you pay, depending on both the APR of your current debt and the term of your consolidation loan

It can help you feel more in control of your money.

Before you consider a consolidation loan, it is important to:

Check you can afford the payments – ideally you want your payments to be lower than you are currently paying
Not take on more debt at the same time, for example by not paying off the existing debts you intend to use it for
Get help and advice before you decide

Talking it through can make things clearer.

Credit unions and community banks offer:

They are owned by their members, the people who save and borrow with them.