Debt consolidation is where you take out a loan to pay off all your other outstanding debts (credit cards, loans etc). Usually, this is done for two reasons – firstly to simplify your finances because you will only have one payment taken out of your account each month, and secondly because the loan should have a lower overall interest rate. Debt consolidation must be thought through carefully as sometimes it can prove more expensive to take a consolidation loan than it would have been to stay with the original debts.

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