Debt consolidation
Combining multiple debts into a single loan, usually to lower the overall interest rate or simplify payments.
Full definition
Debt consolidation is the practice of combining multiple debts, most commonly high-APR credit-card balances, into a single new loan with a fixed APR and fixed monthly payment. When the consolidation loan's APR is meaningfully lower than the weighted APR of the original debts, consolidation reduces total interest paid and simplifies cash flow. It is also used to lower the credit-utilisation ratio on revolving accounts, which can improve credit scores.
- Written by
- Get Advance Loan Editorial Team
- Reviewed by
- Compliance Review
- Published
- January 15, 2026
- Last reviewed
- May 22, 2026
- Installment loanA loan repaid in fixed monthly payments over a set term. Personal loans, auto loans, and mortgages are all installment loans.
- Revolving creditCredit you can repeatedly draw on up to a limit, with a minimum monthly payment based on the current balance. Credit cards and HELOCs are revolving.
- Prepayment penaltyA fee some lenders charge if you pay off the loan before the scheduled end of the term. Most U.S. personal loans do not have one.
- Late feeA fee charged when you don't make a loan payment by its due date. Typically $15 to $40 depending on the lender and state.
- DelinquencyMissing a scheduled payment by 30 days or more. Reported to credit bureaus and a major negative factor in credit scoring.
- DefaultFailure to repay a loan according to its terms. Usually declared after 90 to 120 days of missed payments, depending on lender and product.
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