Debt Consolidation

If you have a debt problem the chances are that you will have loans owed to various creditors, such as credit cards, car loans and overdrafts.  A debt consolidation loan is a new, larger loan that is used to pay off the existing debts.  This brings down the interest rate that you will have to pay on your debts as a large loan over a long time (eg £15,000 over ten years) is an attractive proposition to a lender, meaning they will be prepared to reduce the interest rate.  A typical consolidation loan will charge less than 10% interest whereas credit card companies will typically charge 15% or more.

You can borrow up to £25,000 using an unsecured consolidation loan – above that amount you would need to think about an alternative debt solution.

The best thing to do before undertaking any debt solution is get advice on your best course of action.  Our trained advisors are here to give free and impartial advice on the best debt solution to meet your individual circumstances.

What to Look Out For

Above all, you need to make sure monthly payments are affordable. When debt consolidation loans go wrong, it is often because people have been too optimistic about the repayments they can make.

Note that if you have had problems with late payments already, you may find it more difficult or more expensive to arrange a consolidation loan.

A consolidation loan is a serious commitment and it needs to take priority in your overall finances. You'll need to avoid building up new debts such as credit cards and overdrafts.