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Debt consolidation

Free debt consolidation

If you have debts with more than one creditor and are having difficulties managing them, you might have been tempted by an offer of a free debt consolidation loan.

Debt consolidation replaces all your individual debts with a single debt that covers them all. So you pay one payment each month rather than several at once.

Debt consolidation benefits and risks

Consolidating your debts can make your debts easier to manage, because you only have one payment to make each month. This can also making budgeting easier, as you're only dealing with one creditor.

However, even when a loan might be advertised as 'free debt consolidation' and you do not have to pay any fees to set it up, you still might end up worse off.

For example, the consolidation loan could carry higher interest rates or you might have to pay it back over a longer time period, making it more expensive to pay off.

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

If you have lots of debt, or if you've missed payments on your debts, this will have affected your ability to borrow more money. You might find that the only way you can borrow more money is at a higher interest rate. This means that you could end up paying more money back over the lifetime (or term) of the loan.

You may have to make a large payment to your debt consolidation loan each month, or you could find that you are paying the money back for a long period. If you're applying for any kind of loan you should always check how much the payments are each month, and how many payments you will need to make over the lifetime of the loan.

Consolidation advice

We advise you not to consolidate your debts without a first looking at your situation to see if it would help you. We also advise against consolidating your unsecured debts with a loan secured against your property as this would put your home at risk if you fall behind on payments.

We can help you decide if debt consolidation is the right solution for your situation. If you use our online Debt Remedy tool, we'll look at a range of debt solution to fit your specific circumstances and help you manage your debts.

Helping you become debt free...

“I wish to thank your staff for all the great help they gave me when I was in so much debt.
They were a pillar of support to me.” (Leslie, Essex)

Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.

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© StepChange Debt Charity 2019