Debt solutions · 5 min read
Debt consolidation explained: loans, plans and what to watch out for
Debt consolidation simply means combining several debts into one. It can make your finances easier to manage, but the right approach depends on your credit, your income and how much you owe.
Consolidation loans
A consolidation loan is a new loan used to pay off your existing debts, leaving you with one lender and one repayment. It can save money if the interest rate is lower than your current debts, but you need a reasonable credit score to be accepted.
Be careful of secured consolidation loans, which use your home as security. If you fall behind, your home could be at risk.
Balance transfer credit cards
A 0% balance transfer card lets you move card debts and pay no interest for a promotional period. Watch out for transfer fees and the rate that applies once the offer ends.
Consolidation through a debt solution
If borrowing more is not realistic, a debt management plan or IVA can also consolidate your debts into a single monthly payment — without taking out new credit.
Questions to ask yourself
- Will the total cost be lower, or just spread over longer?
- Can I afford the new payment every month?
- Will I avoid building up new debt on the cards I have cleared?
This article is general information only and may not reflect your circumstances. Rules and limits can change, so always check the details with an authorised provider before making a decision.
Let's see if we can help
Safe, secure, confidential
- Step 1
- Step 2
- Step 3
- Step 4
- Step 5
Why do we ask this?
Your total debt amount helps us match you with solutions designed for your level of borrowing.
