Debt consolidation is a term that is easily misunderstood and often misused, and it is not the same thing as debt settlement. True debt consolidation involves taking out a loan greater than or equal to the combined amounts of your current debts and using that money to pay off those other debts. You would likely only be able to get a debt consolidation loan if you have collateral, like a home or car, to borrow against. Debt settlement doesn’t involve any new loans or debts; instead of paying off your creditors in full, you’ll only have to repay a fraction of what you owe.