Debt consolidation is replacement of multiple loans with a single loan, often with a lower monthly payment and a longer repayment period. It's also called a consolidation loan.

Debt consolidation are of two type- secured debt consolidation and unsecured debt consolidation.
• Secured debt consolidation involves secured loan against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house. The risk of the lender is reduced so the interest rate offered is lower with longer loan tenure. This can often reduce your (the borrowers) monthly outgoing interest payments by paying only one loan, which is secured on the property sometimes over a longer term.
• In the case of unsecured loan consolidation, there is no security or collateral placed for the loan. As there is no collateral here, the interest rate will be on higher side. They do not sanction the exact amount you ask for. They usually allot an amount lower than what you ask for. So that there is not much loss if you fail to repay their money. That is why they also charge higher interest rate.

So it can be seen that an unsecured debt consolidation loan is comparatively safer than a secured debt consolidation. Though you may not get the amount of money that is needed to repay your loans, you don’t have to worry of losing your house or car in case you fail to repay the debt consolidation loan.