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Debt consolidation loans

Debt consolidation loans. How do they work?

Debt consolidation loans combine your debts into one single loan. There may be risks and extra costs. Get impartial advice before going ahead.

A consolidation loan can reduce:

  • The interest rate on debt
  • Payment amounts
  • The number of companies owed

You can also consolidate credit card debt by moving the balance to lower interest cards.

Consolidating debt could make your situation worse. It may not be an option at all if you have a poor credit history.

Get free, expert debt help before taking out a consolidation loan.

Debt consolidation and debt management are two different things.

  • Debt consolidation involves taking out new credit to pay off your debts
  • Debt management is where you, or a debt management plan provider, negotiate affordable payments with the companies you owe money to

Use our debt consolidation calculator to find out if you need debt consolidation or debt advice.

Find out more about the differences between debt consolidation and debt management.

Debt consolidation loans are not right for everyone. Check all available options before making a choice.

Unlock your options as a homeowner

Find out more about how to deal with mortgage arrears, fixed rate ending, how debt can affect your home - and more.

Read our guides

Is it a good idea to consolidate your debt?

A debt consolidation loan will mean you only have one company to pay back each month.

But there are some drawbacks that you need to be aware of:

  • You may be making large payments for a long time
  • You may end up paying more in the long term
  • Your monthly payments may not be affordable

You should always check you can really afford to repay any credit you apply for.

Any way you decide to deal with debts should make your life easier, not harder.

Use our free debt consolidation calculator to find out if this is right for you.

cog iconFor more information, download our debt consolidation guide (PDF)

What is an unsecured debt consolidation loan?

Unsecured means the loan is not linked to your home.

Some consolidation loans need you to secure the loan against your home.

That means if you fall behind or cannot afford payments, your home could be repossessed.

In some cases you can use the equity in your home to manage debts or support your retirement, but make sure you get expert mortgage and equity release advice first.

Find out more about secured and unsecured debt consolidation loans and your home.

Do consolidation loans hurt your credit score?

If you keep up with payments, your credit score should not be affected by the loan.

If the cost of the new loan is hard to manage, and you miss payments, this will show on your credit file. 

Can I get a consolidation loan with poor credit?

Many things can affect your credit file:

Any of these would mean you are more likely to be offered a consolidation loan with higher interest.

If this is the case, consolidation loans may not be the best option for you.

Find out more about how debt affects a credit file.

        
    

Is consolidating debt worth it?

It is important to understand the reality behind the claims made in adverts.


  • Claim: "Consolidate all of your debts into one place"

    • Reality: Having a debt consolidation loan does not stop you using credit.  Many people end up taking on new debts while they have the loan. This means paying back more than one company again

  • Claim: "Government debt consolidation"

    • Reality: This does not exist. Any company saying there are government debt consolidation schemes is misleading you.

  • Claim: "Reduce your monthly payments"

    • Reality: Paying less each month means taking longer to pay off debts.

  • Claim:"Reduce your interest rates"

    • Reality: Because debt consolidation loans last longer, they often end up with higher total interest to pay

  • Claim: "Manageable monthly payments"

    • Reality: Debt consolidation loan payments are only manageable if they fit into a properhousehold budget that you can stick to.

Before taking out a debt consolidation loan


  • Always pay your existing debts in full
  • Cut up your credit cards and cancel previous credit agreements in writing. Otherwise you might be tempted to borrow more money
  • Get free, impartial debt advice. Do this before going ahead with this option. There may be better ways for you to deal with your debts

"They were so kind, they listened patiently and helped me through the process" Alison, Kent

mum at the table with bills

Want to consolidate debt?

Free, online debt advice available now.

Get debt help