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If you're juggling multiple debts, consolidating them into a single loan could simplify your repayments and potentially reduce what you pay each month. Compare debt consolidation loans with MoneyExpert and find a deal that works for you.
A debt consolidation loan lets you combine multiple debts such as credit cards, overdrafts, and personal loans into one single monthly repayment. Rather than managing several balances with different interest rates and due dates, you take out one loan to pay them all off, leaving you with a single, predictable payment each month.
Consolidation loans can be secured or unsecured. Secured loans are tied to an asset such as your home, which may allow you to borrow more or access a lower rate, but puts that asset at risk if you cannot keep up with repayments. Unsecured loans carry no such risk to your property but may come with higher interest rates.
When you take out a debt consolidation loan, the funds are used to pay off your existing debts in full. You then repay the new loan in fixed monthly instalments over an agreed term, typically between one and seven years.
The goal is to end up with a lower overall interest rate, a single manageable payment, or both. It is worth noting that spreading repayments over a longer term can reduce your monthly outgoings but may mean you pay more interest overall.
To get a debt consolidation loan, you'll need to apply through a bank, building society, or online lender. Before applying, it helps to have a clear picture of your current debts including the total amount owed, interest rates, and any early repayment charges.
Lenders will assess your credit score, income, and existing financial commitments before making a decision. Checking your eligibility before you apply is a good idea, as it avoids leaving a mark on your credit file.
MoneyExpert lets you compare debt consolidation loans from a range of lenders in one place, so you can see your options before committing to anything.
Not all debt consolidation loans work the same way. The right type depends on how much you need to borrow, your credit history, and what you're comfortable using as security.
The most common type. No asset is required as security, so your home is not at risk. Interest rates tend to be higher than secured loans, and borrowing limits are typically lower.
Tied to an asset, usually your home. This can mean access to larger amounts and lower interest rates, but your property is at risk if you cannot keep up with repayments.
Eligibility for a debt consolidation loan varies between lenders, but most will look at the following:
If you are unsure whether you qualify, checking your eligibility through MoneyExpert will not affect your credit score.
Pros | Cons |
Simplifies multiple debts into one monthly repayment | You may pay more interest overall if you extend the loan term |
Can reduce your monthly outgoings | Secured loans put your home at risk if you miss repayments |
May lower the interest rate you are paying | Your credit score may dip when you apply |
Fixed repayments make budgeting easier | Some lenders charge early repayment fees on existing debts |
Can reduce stress by giving you a clear repayment plan | Not all applicants will qualify for a competitive rate |
One lender to deal with instead of several | Does not address the underlying spending habits that led to debt |
A debt consolidation loan is not the only way to manage multiple debts. Depending on your situation, one of these alternatives may be a better fit.
Balance transfer credit cards - if your debts are primarily on credit cards, a 0% balance transfer card lets you move existing balances onto a single card and pay no interest for a set promotional period.
Debt management plans - a DMP involves working with a third party to negotiate reduced monthly payments with your creditors. Typically arranged through a charity such as StepChange, with no new borrowing required.
Individual voluntary arrangements - an IVA is a formal legal agreement to repay what you can afford over a fixed period, usually five years. It has a significant impact on your credit file but can be an option when debts feel unmanageable.
MoneyExpert has been helping customers compare and save since 2003. We offer impartial comparisons across a wide range of financial products, with no fees and no obligation.
The best debt consolidation loan depends on your individual circumstances. Comparing loans through MoneyExpert lets you see rates from multiple lenders in one place, so you can weigh up the total cost, monthly repayment, and loan term before committing to anything.
The cheapest debt consolidation loans are typically available to borrowers with a good or excellent credit score. Improving your credit profile before applying, keeping your loan term as short as you can afford, and comparing multiple lenders will all help you find a more competitive rate.
Low interest rates on consolidation loans are generally reserved for borrowers with strong credit histories. A secured loan may also offer a lower rate, though this puts your home at risk if you cannot keep up with repayments.
Legitimate lenders in the UK are required to carry out credit checks before approving a loan. Be cautious of any lender advertising no credit check loans, as these often come with very high interest rates and may not be regulated by the FCA.
Yes, though your options may be more limited. Some lenders specialise in debt consolidation for bad credit borrowers and will consider your application even with a poor credit history. You are likely to be offered a higher interest rate, so it is worth comparing carefully to ensure the loan still works out cheaper than your existing debts.
Lenders assess your credit score, income, and existing debts. Checking your eligibility before applying, correcting any errors on your credit report, and avoiding multiple applications in quick succession will all improve your chances.
It can be, if it reduces your interest rate or simplifies your repayments. It is worth calculating the total cost of the new loan before proceeding, as a longer repayment term can mean paying more overall even if the monthly payment is lower.
Searching through MoneyExpert uses a soft search, which is not visible to lenders and will not affect your credit score. A hard search only occurs when you formally apply with a lender directly.
Yes, applying directly with a lender will leave a hard search on your credit file, which can cause a small temporary dip in your score. However, if consolidating your debts leads to consistent on-time repayments, your credit score can improve over time.
