Debt consolidation involves taking a single loan to pay off others. It is done for securing fixed interest rate or low interest rates or for the purpose of servicing a single loan. It is advisable when you need to pay off credit card debt as it tends to attract a high rate of interest. In case of students, student debt consolidation can be valuable to credit ratings of students but one must keep in mind that not every federal student loan consolidation companies report their loans to credit bureau. You could even use debt consolidation to pay off your emergency cash loans.
At times, debt consolidation companies tend to discount the amount of loan and in case the debtor is facing bankruptcy, the consolidator offers to buy the loan at a discount. In the case of U.S., federal student loans are consolidated in a different manner as compared to UK as they are guaranteed by the U.S. government.