loan consolidation

Loan consolidation is the process of combining multiple existing loans into a single new loan with a new interest rate, repayment term, and payment schedule. The purpose is to simplify debt management by replacing several obligations with one payment. Consolidation may also secure a lower interest rate or extend the repayment period, which can reduce monthly payments. However, extending the loan term can increase the total amount of interest paid over time, even if the rate is lower. Lenders typically evaluate a borrower’s credit history, income, and existing debt before approving a consolidation loan.

[Last reviewed in November of 2025 by the Wex Definitions Team] 

Wex

• COMMERCE
• commercial activities
• banking
• wex definitions
• business sectors
• commercial transactions
• money and financial problems