Debt consolidation takes existing debts and groups them into one loan. A new loan must be obtained in order to consolidate the existing debts. Debt consolidation only works if the new loan’s interest rate is lower than the average interest rate of the older loans. Because less of each payment is going toward interest, the consolidated loan can be paid off quicker. However, debt consolidation only works if the borrower does not spend the extra money on more consumer goods, thus increasing their overall debt and effectively, nullifying the benefits of debt consolidation.