Depending on agency availability, local laws and jurisdiction, some countries offer citizens government debt consolidation loan options. Governments may also have an interest in helping citizens do things like get an education or purchase a home without incurring crippling debt.

Government debt consolidation loans are given by a government programmer agency in order to assist consumers pay off debts owing to multiple institutions. The agency then pays the consumers’ creditors and issues a new loan with a different set interest rate. At times, this interest rate may be lower.

There are 4 types of debt consolidation loans:

Standard: The monthly payment amount is consistent over the time of the loan.

Extended: Increases the time of the loan by decreasing monthly payments. A higher interest rate is charged.

Graduated: This is a combination of both. It starts with lower monthly payments which increase over time. It’s often popular with students.

Income Contingent Plan: Considers the borrower’s salary and earning potential when setting the monthly payment.

Benefits of government consolidation loans are the competitive interest rates, which often reduce financial burdens on consumers. There are risks however, such as harsher penalties for defaulting on payments.

What one needs to qualify:

You’ll need to have two or more debts

You must not be in default or be delinquent on your payments

You’ll need to have outstanding government loans

In some cases collateral may be required if the original loans were unsecured. You may not have to submit a credit check (this is dependent on the loan type and your location.)