Taking out a debt consolidation loan essentially involves taking out a loan that is big enough to cover all your other debts. This is then used to pay off those debts. This leaves you with just the one monthly repayment to make, against the debt consolidation loan itself.
As to whether or not your home is at risk, well this depends on the type of debt consolidation loan you take out.Â As with any loan, there are both secured and unsecured options available.
With an unsecured debt consolidation loan, your home is not at risk. This is because you’re not required to ‘secure’ your loan against property or equity you own. However, as this is a higher risk option to the lender, it may be that the interest rates on such loans are higher.
With a secured debt consolidation loan, you secure the value of the loan often against your home. This means that if you miss payments or find yourself unable to afford to pay the loan back, you do run the risk of losing your home. However, as this type of loan is less of a risk to the lenders, the interest rates are often more favourable.