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Home loans, mortgages, debt consolidation, in light of the recession, these have become pretty hot topics for the media to discuss.

However, the media often has an odd tendency to muddy the waters as opposed to actually clarifying much, so for all the talk of debt consolidation, not a lot of it is very clear, and most of it only serves to confuse people who might need to look into the option.

So in the interest of clarification, we’ll get into what, exactly, debt consolidation is.

Simply put, debt consolidation is the act of taking out one loan to pay off several other loans. It really is as simple as that. The hows and whats and whys are a little more complicated, but as far as a broad definition goes, it’s just borrowing money from one source to pay off debts that have become unmanageable, nothing more.

Debt consolidation can involve the transfer of a number of unsecured loans into a single unsecured loan, but more commonly, the debt consolidation loan will be attached to collateral of some form. For example, you might have a number of unpaid credit card bills, car payments, student loans and so forth, so you take a consolidation loan out using your house as collateral.

You might wonder why you would bother with a debt consolidation loan, as opposed to just paying off the debts you currently have directly. After all, you’re still making roughly the same payments every month, right?

Well, debt consolidation is there as an option for people dealing with debt that has simply become overwhelming. Take for example a business owner who is forced to close shop, but still owes thousands to the IRS in business and self employment taxes, or somebody trying to improve their credit in the face of massive unpaid credit card debt. You might never need one, but if you do, a consolidation loan is there as a lower risk, easier-to-manage option.