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Consolidation loans are a loans designed to pay off other loans. Some companies offer debt consolidation loans and other people may choose to use the equity in their homes to consolidate their other loans. Finally, people often get consolidation loans specifically for student loans.

Debt consolidation loans are usually taken out by nonprofit companies to help individuals to pay off other, high interest loans, and make their life simpler. Thousands of dollars can be saved on when you consolidate credit card bills and unsecured debt. However, debt consolidation loans are usually a last resort as they can negatively affect your credit rating. In other words, debt consolidation is usually done by people who are in heavy debt and are contemplating bankruptcy.

Often, homeowners will get a second mortgage to consolidate their debt. If you owe tens of thousands of dollars in credit card bills, medical bills, store credit, etc... you may save a lot of money by taking out a second mortgage. Second mortgages typically have very low interest rates, are tax deductible, and easy to get so long as your credit is good. You then take the money and pay off the other loans you have. If a credit card has a 20% interest rate and your home equity loan as a 6% rate, it is a no-brainer. This is the best use of debt you can do.

Finally, there are many programs out there that allow students and former students to consolidate their governement-backed student loans. The interest rates are insanely low and it most often pays to consolidate.