what is debt consolidation

[mary1]

What exactly is debt consolidation? I can't quite grasp the concept. Why would I want to do that?

I have some debt and I need an easy way to get out of it.

[Canadian]

Debt consolidation is combining several debts into one, in order to pay less interest charges. For example let's say that you have 2 credit cards with $5,000 outstanding balance on each. The first card charges you 16% per year, and the second one charges 18% per year. If you can find another credit card issuer that can offer you 12% interest per year, and you transfer both balances to the new lower-interest credit card, then you'll be paying much less in interest.

[trent]

Debt consolidation is just a way to save on interest, by transferring one or more expensive debts to a single less expensive credit line.

[ggonzo]

Instead of paying several bills a month you consolidate them in one and pay only one bill. Usually you get the new loan with better terms; you get a lower interest rate. It is not rocket science but sometimes after you consolidate your bills you will be paying your new loan for a longer period of time comparing if you didn't consolidate. I don't know if it is worth it; maybe for people with small income and lots of debt it makes sense.