With this type of debt consolidation, you get a new loan that's big enough to pay off your other debt. For the most part, debt consolidation is most effective when you use it on high-interest debt, like title loans, payday loans, credit cards, and personal loans with high interest rates. Debt consolidation is the process of combining multiple debts into one loan with a lower interest rate, making payments simpler and potentially reducing the amount of interest paid over time.