A consolidation loan is a loan used to manage your debt into one loan. Proceeds from one larger loan are used to pay off other smaller debts.
This is generally done through unsecured loans but with lower interest rates than credit cards.
Alternatively, you can acquire a secure consolidation loan on a property through a second mortgage or a home equity line of credit. The property will act as collateral and the interest is lowered as a result. Because unsecured loans have no collateral, the interest will be higher.
Consolidation loans allow you to lower your rates. This means lowering monthly payments at the cost of extending the amortization period which can end up costing you more in the long run. Debt consolidation generally turns unsecured debt into secured debt. While debt consolidation can help restore credit balance it is important to improve spending habits to prevent spending more than you make and having to go through the process again.