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Debt consolidation loans

Debt consolidation loans or debt management?

Debt consolidation means using credit to merge your debts into one to pay them off. With debt management solutions you make payment arrangements with the people you owe. Or have debts written off.

Debt consolidation might not be your best option. There may be better ways for you to deal with your debt.

You could consider a debt solution instead. Find out more about different solutions.

You should get free debt advice before choosing a debt solution.

What is a debt management plan (DMP)?

This is for people who have some money left over at the end of the month, but not enough to pay all their debts.

You only pay what you can afford in a DMP. As things get better, you pay more through your plan to pay the debt off sooner.

A third party can arrange a DMP for you. This could be a charity like us, or a debt management company. The organisation arranging your DMP will:

  • Draw up a proposal for the people you owe money to
  • Ask them to accept lower payments
  • Ask for interest and charges to be stopped
  • Make a single monthly payment to the people you owe

Our debt management plans are free, but other companies may charge you to have one.

Find out more about debt management plans.

How does bankruptcy work?

Bankruptcy is a legal process for people who cannot pay their debt within a good amount of time.

It is a form of insolvency. To be eligible, your unsecured debts must be more than your assets. These are things like property and vehicles.

There are different forms of bankruptcy across the UK.

If you make yourself bankrupt, the people you owe write off your unsecured debts. This gives you a fresh start. But you will be subject to certain restrictions during the term of the bankruptcy.

Bankruptcy should not be taken lightly as it is a big step. You may have to give up your assets. It may impact your job and seriously affect your credit rating.

Find out more about:

What is an individual voluntary arrangement (IVA)?

This is a legal process in England, Wales or Northern Ireland. In Scotland you can apply for a protected trust deed. This works in a similar way.

An IVA is arranged by an insolvency practitioner. They will:

  • Help and advise you throughout the process
  • Assess your finances
  • Draw up a proposal for the people you owe

With an IVA, you use the available income you have to make monthly payments you can afford over an agreed period of time. In most cases, this is five or six years.

You may pay a lump sum toward your debts. At the end of the agreed period, your lenders write off the remaining debt.

The payments you make to the people you owe also include a fee.

Find out more about individual voluntary arrangements.

What is a debt relief order (DRO)?

To qualify for a DRO you must:

  • Live in England, Wales or Northern Ireland
  • Owe less than £30,0000 (£20,000 in Northern Ireland)
  • Have less than £2,000 in assets (£1,000 in Northern Ireland) and a car worth no more than £2,000 (£1,000 in Northern Ireland)
  • Have less than £75 in surplus income per month. This is what is left after paying your household bills and living costs (£50 in Northern Ireland)

An approved organisation must submit your DRO application to the official receiver. As of April 6th 2024, there is no fee for DROs in England and Wales.

If you live in Northern Ireland, you will have to pay a fee of £90. You will not get this back if your application is not successful.

If your DRO application is successful, your lenders will write off your remaining debt after a year. But you must keep to the terms and conditions of the order.

Find out more about debt relief orders.

Not sure how to deal with debts?

We can help.

Use our online debt advice tool to find out what to do next, or contact us for confidential, free debt advice.