Debt consolidation is the way of repaying several loans by taking a single loan. Instead of dealing with several creditors, the borrower opts for a single creditor which is often a bank or credit union. In the usual case, it is taken against solid collateral which offers less risk to the lender and such loans are termed as secured debt consolidation loans. As the collateral serves as a good security against the loan, the interest rates will be relatively less. In some cases when the loan is taken without a collateral, it is termed as an unsecured debt consolidation loan. Another advantage of the debt consolidation loan is that it can be availed without the need of clearly mentioning the purpose of the loan.