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How Can I Consolidate My Debts?

If you're struggling with multiple debts, consolidation can provide relief. This guide from explains how to consolidate debts into one monthly payment.

Juggling multiple individual loan payments each month alongside trying to keep up with minimum credit card payments quickly becomes a challenge. Missed payment dates, late fees and accumulating interest can put you in a debt trap.

Consolidating your debts into a single new loan with one regular payment can provide greater simplicity and control. At Consolidation Expert, we may be able to find a debt consolidation loan to help you regain control of your finances, lower your monthly repayments and, long-term, help you to become debt free.

This guide outlines how debt consolidation works and what steps to take to consolidate your debts successfully.

Key Takeaways:

  • Debt consolidation allows you to combine multiple debts like loans, credit cards and overdrafts into a single new loan with one monthly payment.
  • This simplifies repayment, provides structured payment terms, and can potentially save money through lower interest rates.
  • To apply for a consolidation loan, you'll need to undergo credit checks and affordability assessments by lenders. Those with good credit get the best rates.
  • It's important to compare loan amounts, interest rates, terms, fees and other factors across multiple lenders to find the best consolidation deal.
  • You may be able to release equity from your home through a secured consolidation loan. But this means your house is at risk if you default.
  • Other consolidation options like balance transfer cards and debt management plans exist. But consolidation loans offer fixed repayment terms.
  • Consolidation works best if it secures you a lower rate on debts. You need to manage repayments diligently to avoid further financial issues.

How Does Debt Consolidation Work?

Debt consolidation involves taking out a new consolidation loan with funds to pay off your existing loans, credit cards and other unsecured debts as a lump sum(s). Your various creditors are repaid and closed, leaving just the new consolidation loan.

This takes all your debts currently spread across multiple accounts with various payment dates, interest rates and terms, and bundles them together into one easy place.

Now you just make one predictable repayment each month over a fixed term to your consolidation lender. Your debts are combined into a structured repayment plan with no surprises.

Common debts suitable for consolidation include:

  • Credit card balances
  • Store cards
  • Payday loans
  • Personal loans
  • Overdrafts
  • Utility bills

Through consolidation, you can potentially secure a lower interest rate than you currently pay across high-rate debts like credit cards. This reduces the total interest you pay overtime, saving money.

A debt consolidation loan gives you a clear path to becoming debt-free with manageable, consistent payments. But it requires diligently sticking to the repayment plan.

How Do I Apply for a Debt Consolidation Loan?

Applying for a debt consolidation loan first involves determining if your financial situation meets lender requirements:

  • Credit history - You'll undergo credit checks. Good credit scores unlock better rates. Those with fair/poor credit may face higher interest or be declined.
  • Income vs existing debts - Lenders want to see you have sufficient income to afford the new payments alongside living costs.
  • Loan amount - Request a large enough loan to pay off your current debts in full, but avoid borrowing more than what you need.

Then submit a consolidation loan application. You’ll provide documents to your chosen lender verifying:

Documentation Requirements Details
Income Payslips, tax records, bank statements etc.
Debts Statements from creditors demonstrating amounts owed.
Assets Proof of homeownership etc which may support your application.
Identify Photo ID, proof of address, National Insurance number.

Based on your profile, the lender will decide whether to approve your application and determine the interest rate, loan amount, term length and other conditions you qualify for.

Always compare quotes from multiple lenders to find the best loan for your needs before formally applying.

Should I Take a Secured or Unsecured Consolidation Loan?

Consolidation loans come in two main forms – secured or unsecured:

Unsecured loans have no collateral requirements. The lender assesses your ability to repay based on your creditworthiness and income. If you default, they cannot seize assets.

Secured loans require putting up an asset like your home or car as collateral. This allows larger borrowing amounts but risks losing your home if repayments are missed.

Unsecured loans are lower risk. For most borrowers, an unsecured debt consolidation loan is the safer choice. It avoids the need to pledge a valued possession as security.

Yes, interest rates may be slightly higher and loan amounts lower compared to a secured loan. But if your financial situation deteriorates, all that happens is potential credit damage – your home and assets remain protected.

Only consider a secured consolidation loan if you fully understand the repossession risks, are extremely confident in your ability to repay, and the amount you need to borrow makes it essential.

Top Tip:

For most, unsecured loans pose less of a hardship threat if difficulties occur.

What Are Other Ways to Consolidate Debts Besides Loans?

Beyond standard consolidation loans, other options also exist to consolidate multiple debts:

  • Balance transfer credit cards shift balances from high-interest cards onto a new 0% card for a promotional period. However, you must repay the full amount before interest kicks in again.
  • Debt management plans allow negotiation of reduced interest rates on debts and consolidated repayments through a FCA approved debt adviser. But accounts will be closed out.
  • Payday loans offer quick access to funds but very high interest rates. They should only be used as an absolute emergency measure.

Consolidation loans often make the most sense for long term, structured repayment. But explore all your options fully before deciding the best debt consolidation method for your circumstances.

Tips for Managing Your Consolidated Debt

Once you’ve consolidated debts onto a new loan, be sure to:

  • Make repayments on time - Late fees will undermine the interest savings. Setting up autopay helps avoid missed payments.
  • Pay extra when possible - Making overpayments directly reduces the principal debt and interest paid
  • Avoid taking on new debt - Stick to a budget and build savings to improve financial foundations.
  • Monitor your credit - Check regularly for any mistakes impacting your score so you can dispute errors.
  • Refinance if rates drop - If you find a lower rate later, refinance to continue lowering your costs.

With a consolidation loan, the hard work begins after receiving the funds. Avoid complacency and remain diligent to become debt-free.

For Affordable Debt Consolidation Loans, Apply with Consolidation Expert

Here at Consolidation Expert, we understand the overwhelming stress of trying to meet multiple debt obligations. A consolidation loan may be able to provide straight-forward, structured repayment terms to help you regain control of your finances.

We work with specialist lenders to match applicants across the credit spectrum with competitive consolidation loans. Whatever your credit, we may be able to help regain control of your finances.

Take the first step and apply online to check your eligibility today.

Representative 14.8% APR

We are a broker, not a lender.

Representative Example: Borrowing £15,000 over 60 months, repaying £355.28 per month, total repayable £21,316.57.

Total cost of credit £6,316.57.

Interest rate 14.8% (variable).

The lenders on our panel offer loans for 12-360 months, with rates from 4.7% APR to 42.6% APR.

The Representative Example is based on all loans paid out by lenders between 1st Jan 2022 and 31st Dec 2022.

Further reading

Read Is it Possible to Consolidate Short-Term Same Day Loans?
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Read Can I Consolidate Holiday Loans with Other Debts?
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Read How Can I Pay Off My Debts Faster?
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