When it can help
Consolidation can help if you have several debts at high rates and a steady income. Replacing them with one lower-rate loan can cut monthly costs, reduce admin and give you a clear end date.
When it can make things worse
- Stretching short-term debt over a much longer term, which raises the total cost
- Securing previously unsecured debt on your home
- Running card balances back up after clearing them
A quick test
Add up the total you would repay on your current debts if you cleared them at your current pace. Compare it with the total amount repayable on the consolidation loan. If the loan costs more in total, you are paying for a lower monthly payment.
Free alternatives
If you are behind on payments or using credit to pay for essentials, speak to a free debt advice service such as MoneyHelper, StepChange, National Debtline or Citizens Advice before taking new credit. Options like debt management plans and breathing space protection may be more suitable.
Common questions
Can I consolidate debts with bad credit?
Possibly, but rates will be higher. A homeowner loan may be an option, with the risk to your home that brings.
Should I close my credit cards after consolidating?
Closing them removes the temptation to reuse them. Keeping one with a low limit can help your credit history.
This guide is general information, not personal financial advice. If you are worried about debt, free help is available from MoneyHelper, StepChange and Citizens Advice.
Try it: Debt Consolidation Calculator