Debt consolidation loans: understand your options and take control of your repayments
Explore how debt consolidation loans work, understand the costs involved, and discover whether combining several debts into one monthly repayment could suit your circumstances.
- Plain-English explanations
- Balanced risks and benefits
- Free in-browser calculators
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What is debt consolidation?
Debt consolidation means taking out one new loan to pay off several existing debts, so your separate monthly payments become a single one.
Say you owe money on two credit cards and a personal loan. A debt consolidation loan could clear all three at once, leaving you with one payment to one lender each month instead of three to keep on top of.
That can make your borrowing much easier to manage, and sometimes it brings down the interest rate too. It helps to be clear about what it does not do, though: consolidation does not wipe out what you owe. You still repay the full amount, and spreading it over a longer term can mean paying more interest in total, even when the monthly figure looks smaller.
The idea in one picture
£8,900
Illustrative example. Balances, rates and eligibility vary by lender and individual circumstances.
Four steps to decide whether consolidation suits you
Taking a new loan is not automatically the right move. Working through these steps helps you make an informed decision.
Review your debts
List every balance, interest rate and monthly payment so you can see the full picture of what you owe.
Understand your options
Compare the types of borrowing available to you, along with any arrangement fees and early-repayment charges.
Compare the full cost
Look beyond the monthly payment to the total amount repayable and whether the repayments are genuinely affordable.
Decide if it is suitable
Weigh the benefits and risks for your situation, and consider free debt advice before committing.
Common types of debt consolidation loan
Different products suit different circumstances. Each has distinct features, costs and risks.
Unsecured loans
A personal loan that is not tied to your home or other assets. Approval and rates depend on your credit profile.
Learn more →Secured loans
Borrowing secured against your property. Your home may be at risk if you do not keep up repayments.
Learn more →Bad credit loans
Options sometimes available to people with a poor credit history, usually at higher interest rates.
Learn more →Personal loans
Using a standard fixed-rate personal loan to clear existing balances and set a clear repayment schedule.
Learn more →Estimate your repayments in seconds
Adjust the loan amount, interest rate and term to see an illustrative monthly repayment, the total interest and the total amount repayable.
- Works entirely in your browser
- No personal details requested or stored
- Clearly labelled as an example, not an offer
Repayment calculator
IllustrativeCalculations assume a fixed interest rate and equal monthly repayments. They are illustrative examples and not loan offers or quotes.
Benefits and risks, side by side
Debt consolidation can help in the right circumstances, but it carries real risks. Both deserve equal attention.
Potential benefits
- One scheduled monthly repayment instead of several
- Easier to track payments and due dates
- Potentially a lower interest rate than some existing debts
- A clear, fixed end date for the balance
Potential disadvantages
- A longer term can increase the total cost of borrowing
- Arrangement or early-repayment fees may reduce any savings
- New borrowing does not fix underlying affordability problems
- Secured borrowing can put your home at risk
- Applications and missed payments can affect your credit file
Questions worth asking before you borrow
There is no single right answer. Working through these points helps you judge whether consolidation would genuinely improve your situation.
If you are struggling with repayments, free and impartial debt advice is available before you take on any new borrowing.
Will the total cost be lower or higher?
Compare the total amount repayable, not just the monthly figure.
Is the repayment affordable every month?
Factor in changes to income, bills and interest rates.
Are there fees or charges to consider?
Arrangement fees and early-settlement charges can change the maths.
Popular guides
Clear, practical articles to help you understand the detail.
How debt consolidation works
The process from reviewing debts to making your first repayment.
Read guide →
Debt consolidation and bad credit
What may be possible if your credit history is poor, and the trade-offs.
Read guide →
Secured vs unsecured loans
How the two differ on risk, cost and who they tend to suit.
Read guide →
Does it affect your credit score?
The short-term and longer-term effects on your credit file.
Read guide →
Alternatives to consolidation
Balance transfers, debt management plans and free debt advice.
Read guide →
Understanding loan APR
What APR includes, and why the representative rate may differ from yours.
Read guide →Frequently asked questions
Short answers to the questions people ask most often. The guides go into more depth.
Does debt consolidation reduce how much I owe?
No. Consolidation moves your debt into one place; it does not write any of it off. You repay the full balance, plus interest and any fees. It can make repayments easier to manage and sometimes cheaper, but the debt itself remains.
Will consolidating always save me money?
Not necessarily. A lower monthly payment often comes from a longer term, which can mean paying more interest overall. Always compare the total amount repayable and any fees, not just the monthly figure.
Can I consolidate debt if I have bad credit?
It may be possible, but options are usually more limited and interest rates higher. Approval is never guaranteed. Our bad credit guide explains the considerations.
Is a secured loan riskier than an unsecured one?
A secured loan is tied to an asset, usually your home, which the lender could take steps to repossess if you do not keep up repayments. Unsecured loans are not tied to an asset, though missed payments still have consequences.
Are your calculator figures real loan offers?
No. Every figure on this site is an illustrative example to help you understand the maths. They are not quotes, offers or currently available rates. Any real borrowing figures come from a lender after an application.
Worried about debt? Free, impartial help is available
Taking on more borrowing is not always the answer. If you are finding it hard to keep up with payments, free and confidential debt advice is available from independent, not-for-profit organisations in the UK. They can talk through every option with you, including ones that do not involve new borrowing.
These organisations are independent of this website. Links open in a new tab. See when to seek free debt advice for more.
Understand your debt consolidation options
Work through the guides at your own pace, and use the calculators to see illustrative figures before you make any decisions.