Consolidate expensive debt to reduce interest, lower payments & stop late fees

Access the money tied in your home to get great consolidation loan rate from leading UK lenders

What is debt consolidation?

If you have a number of different debts, one way that you can keep control of your payments is through debt consolidation. This is where you merge a number of debts together into one loan as a way of potentially lowering your monthly payments. Debt consolidations can be secured against your home although some lenders do offer unsecured consolidation loans.

The aim of debt consolidation is to reduce your monthly repayments, simplify your household finances and to reduce the interest rate you are paying on your debts.

How does debt consolidation work?

With a debt consolidation loan you borrow enough money to pay off all your current debts. Instead of having various overdrafts, store cards, personal loans and credit cards you will owe money to just one lender.

You can normally choose the amount and term of your debt consolidation loan. This ensures you can clear your debts while maintaining an affordable monthly repayment.

How much can I borrow for debt consolidation?

There is no fixed amount that you can borrow. The amount you can borrow on a debt consolidation loan will depend on your personal circumstances.

For a secured debt consolidation loan, your borrowing potential will depend on the amount of equity that you have in your property (the difference between any outstanding mortgage and secured debts and the value of your home).

Your debt consolidation loan will also be determined by your income and outgoings. A lender will generally want to be sure that you have sufficient income to cover both your main mortgage and your debt consolidation loan. It may also be dependent on your credit rating.

The pros and cons of debt consolidation

There are a number of advantages and disadvantages to debt consolidation.


One of the main reasons that people consolidate their debt is to reduce their interest payments and their monthly outgoings. If you are making several payments each month to expensive loans or credit cards, your total monthly outgoings could be significant. As debt consolidation typically lets you spread your repayments out over a longer period, you will often find that your monthly repayments will reduce substantially. An example of this is shown later in the section ‘How much debt consolidation could save you’.

In addition, many debt consolidation loans are available on a ‘secured’ basis. This means that a lender takes a legal charge over your home as security for the debt. As they have this security, the lending is less risky and so they can offer lower interest rates.

Another advantage of debt consolidation is that it can help you regain control of your finances. Managing various monthly payments to different creditors can be tough, especially if you have a number of different direct debits to a number of loans and credit cards. When you consolidate your debts you are left with one creditor and one manageable monthly payment. It removes a lot of the time consuming administration of having to deal with lots of different creditors.


While there are many benefits to debt consolidation, there are also several factors to bear in mind.

Firstly, debt consolidation can often be taken over a long period. While spreading your debts over a number of years may result in lower monthly repayments, you could end up paying more interest in total as you are paying the loan back over a longer time.

In addition, you should remember that debt consolidation is not a solution in itself. If you continue overspending and don’t change your financial habits you will probably end up back in debt in the future. If you are going to consolidate your debts you should also make changes to your income and expenditure to ensure that you don’t simply end up back in debt further down the road.

If you are looking at secured debt consolidation options you should also remember that the lender takes your home as security for the loan. This means that your property will be at risk if you so not keep up repayments on this loan. This is not the case for unsecured debts such as personal loans, credit cards or store cards.

Your debt consolidation options

There are four main debt consolidation options to consider:

Secured debt consolidation loan

A secured debt consolidation loan lets you use the equity in your home to repay your debts. As we saw earlier it can result in lower interest rates and reduced monthly repayments.

Secured loans are generally available if you have equity in your home. Even if you are self employed or have a less than perfect credit history you may be accepted for such a loan. Bear in mind that your home is at risk if you don’t keep up your repayments.


A remortgage involves switching your mortgage from one lender to another. As part of this process you may be able to borrow additional funds to consolidate your debts. Remortgages are often available at competitive interest rates and you can benefit from a fixed or tracker deal on both your main mortgage and the additional borrowing.

However, this may not be an option if you have ‘early repayment charges’ for repaying your current mortgage. In addition, lenders are increasingly choosy about who they lend to and so you are likely to have to prove your income and have a good credit rating.

Unsecured debt consolidation loan

An unsecured debt consolidation loan is a personal loan that you can use to repay your existing debts. As it is not secured on your home your property is not at risk if you can’t make your repayments – although the lender can pursue you through the courts for the debt.

You may have to have a good credit rating to secure an unsecured debt consolidation loan and the amounts you can borrow are typically lower than on a secured loan. And, you will probably have to take the loan over a shorter term.

Balance transfer credit cards

Many credit card providers offer low rate or 0 per cent balance transfer deals on their cards. This means that you pay a low rate of interest (sometimes 0 per cent) on your credit card balance for a fixed period.

If you are accepted for a 0 per cent balance transfer credit card it can pay to transfer your outstanding balances to this card. It means you will pay no interest on your borrowing, allowing you to repay the money you owe much more quickly.

However, you should always try to repay the debt in full during the low rate period otherwise you will end up paying the lender’s standard APR once the deal ends. In addition, you may have to have a good income or credit rating to qualify for these cards.

How much debt consolidation could save you

Three of the main reasons to consider debt consolidation are:

  • It can leave you debt free sooner
  • It can reduce your interest costs
  • It can reduce your monthly repayments

The example below shows how a secured debt consolidation loan could help. Here, you have a total of £18,500 of debt: £10,000 on a credit card at the UK’s average credit card rate of 17.3 per cent, £7,500 on a personal loan at 8.9 per cent and a £1,000 overdraft at 18.9 per cent (with a £10 monthly fee).

Type of debtAmount owingCurrent monthly paymentInterest rateHow long it will take to repay debt assuming current paymentTotal interest cost assuming current payment
Credit card £10,000 3% (£300) 17.3% 24 years, 11 months £8,647.71
Personal loan £7,500 £155.32 8.9% 5 years £1,819.44
Overdraft £1,000 £50.36 18.9% (+ £10 per month fee) 2 years £448.64 (including fees)

In the example above, your monthly repayments are currently around £500. You owe £18,500 and you will pay £10,915.79 in interest and charges. It will also be almost 25 years before your debts will be repaid.

Compare this to a secured debt consolidation loan:

Type of debtAmount owingCurrent monthly paymentInterest rateHow long it will take to repay debt assuming current paymentTotal interest cost assuming current payment
Secured debt consolidation loan £18,500 £285.64 10.5% 8 years £8,921.47

By consolidating your debts into one secured loan you will reduce your monthly outgoings by over £220. In addition, you will pay around £2000 less interest and you will be debt free in just eight years rather than 25 years.

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