For people trying to cope with having too much debt there are many different companies offering debt consolidation loans. As such these types of loans are demanded by a lot of people having the same type of problems.
Basically, they can help ease the obligations of the borrower. Consolidation can extend the life of the loan, lower the interest rate, and make it so you only have one payment to make. Of course none of this is a guarantee as each loan is different.
It is common for lenders to want a consolidation loan to be backed by a mortgage, although that is not always the case. If a lender does get the loan secured by a mortgage they will be better protected in the event of default.
After the loan has been secured it is common for the lending company to contact all the other lending companies to negotiate a payment. It is not uncommon for the lending companies to offer some type of financial advice to the troubled borrowers.
Basically a consolidation loan may be regarded as a form of debt refinancing. Going forward there will be one loan with the new company who has settled any amounts owed to the other lenders.
Here is something to keep in mind:
Generally only unsecured loans can be consolidated.
Consolidating your debts into one loan is an excellent option to consider for many people having financial troubles. Consolidating your loans into one should be considered if you keep getting late fees and penalties due to non payment.