A debt consolidation loans is simply a loan which is used wholly or partially to repay existing loans or outstanding credit cards and bills etc.

A debt consolidation loan is often used to bring together a number of debts in to one more easily managed loan where the monthly repayment cost is reduced by extending the period of the loan. This does not necessarily mean that you have been experiencing repayment problems - the new arrangement simply means that you have one monthly repayment instead of a number of repayments and the monthly cost is more manageable.

The lender will usually want to be sure that you do use the money to repay your other debts and sometimes your new lender will want to contact your existing lenders and repay directly to them.

The amount of money you borrow can be more than you need to repay your other outstanding debts. This means that having consolidated your other debts, there will be money left over for you to spend as you like. It's up to you how you spend this money but always be careful not to borrow beyond your ability to maintain the monthly repayments.

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