The term debt consolidation means taking a loan to pay off any previous debts. With the onset of economic crisis and constant inflation, it has become a very popular practice in the US. People who have multiple debts and several liabilities in forms of different loans often settle for the process of debt consolidation. The idea is to pay one single loan installment at a reduced rate of interest instead of making multiple payments to different lenders. It can also be considered a transition from unsecured liabilities to a secured loan. Often this secured loan is obtained against the guarantee of an asset which is kept as collateral.