Consolidation loans

A consolidation loan is where a borrower takes out a further loan to pay off all the existing loans, therefore consolidating the debts into one single loan. The new loan can be unsecured but normally it is secured against the home becoming a second mortgage or secured loan. This can be a workable option for some borrowers as the single payment will be less than they have been paying to all their other creditors, if they can manage to keep up the normal payments without having to resort to additional loans. However, if the normal payments cannot be met or they continue to borrow on top of the consolidated loans then the borrower’s home could be at risk.