Which term describes combining a number of different loans into a single loan or payment plan to simplify repayment?

• A. Bankruptcy
• B. Debt consolidation
• C. Debt refinancing
• D. Deferrment

Answer: (B)

Debt consolidation is the process of combining several debts into one loan or payment plan, which makes repayment simpler by giving you a single monthly payment and a single set of terms. This can ease budgeting and, if you qualify for a lower rate or a longer repayment period, may reduce monthly payments. It’s a strategy focused on streamlining obligations rather than eliminating debt or changing the nature of the debt itself. It differs from bankruptcy, which is a legal discharge of debts; debt refinancing, which replaces one loan with a new loan (often to secure a better rate or terms for that loan), and deferral, which simply postpones payments without changing the total amount owed.