Debt consolidation loans

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A debt consolidation loan lets you combine all your existing loans, meaning you could potentially save a lot of money in lost interest.

It works like this: you work out how much you owe on all your loans in total, and apply for that exact amount at a more favourable rate of interest. You then pay them all off at once, leaving you with one easy-to-manage monthly payment.

There are two types of debt consolidation loan: unsecured and secured. Your lender will decide the terms and APR it offers after a look at your credit score, and if you have bad credit they may offer you a loan secured against your car or house

A debt consolidation loan can be used to cover a range of existing credit – and particularly the following:

Credit card debt

Credit card debt

If you have debts on credit cards
with high APRs, you could be
repaying more than you need


Personal loans

Personal loans

Perhaps you took out a car loan,
or maybe you wanted to fund
DIY or a holiday




The rules on agreed overdrafts
recently changed, and interest
rates often reach a whopping 40%


Store cards

Store cards

These may encourage you to spend
more than you planned, and they
often have high APR and fees



Reduce monthly repayments,

especially if you have quite a few outstanding debts all accruing interest

Lower overall interest,

because debt consolidation loans tend to have lower APR than payday loans or some credit cards

Easier to keep track of your debt,

because managing one repayment a month is much more straightforward

Boost your credit score,

as it’s easier to make one monthly repayment on time and in full


Missed payments have consequences

and you will hit your credit score if you don’t meet your responsibilities

Set-up fees can be pricy,

as your existing creditors may charge you for settling up early or for transferring the balance of your loans

You may lose your home or car.

If you can’t keep up with your repayments on a secured loan, your collateral may be repossessed

Other options are available,

including 0% balance transfer credit cards, which might suit someone who has more modest debts

Compare debt consolidation loans and find the best deal for you

Work out what you owe

Work out what you owe

Do the sums and find out exactly
what your debts are worth in
total, with outstanding interest


Work out what you owe

Check your eligibility 

Enter a few details about you and
your finances into MoneySuperMarket’s
Eligibility Checker tool


Work out what you owe

We do the rest

We’ll come back with a range of debt
consolidation options – and your
credit score won’t be affected


Our Eligibility Checker tool preserves your credit score by showing you which loan offers you're most likely to be accepted for, and helps you avoid those you may not receive. Getting declined for a loan application can damage your credit score, which makes it harder to borrow money in the future – and no-one wants that.

Find a loan

MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.

What is a debt consolidation loan?

A debt consolidation loan is a new personal loan taken out to repay all, or some, outstanding debts through a single monthly repayment.

What’s the difference between secured and unsecured consolidation loans?

Most debt consolidation loans are unsecured, which means you can borrow the money without having to put up a valuable possession of yours such as a car or home as collateral.

If your credit history is poor however, lenders might ask you to secure your loan. This means that if you miss enough repayments, your home or car could be repossessed.

Do consolidation loans hurt your credit score?

It is possible your credit score could dip even after a successful application for a new consolidation loan. But this should only be temporary. Paying back your loan in the agreed manner each month should improve your rating over time.

However, as with all credit cards and loans, if you miss monthly repayments your credit score could be negatively affected.

Can I use a normal personal loan to consolidate debt?

This is possible, though some personal lenders prefer you to use the money they lend you for a set list of purposes. Some of them don’t want you to use a personal loan for debt consolidation. It’s a good idea to check with the provider before you apply.

What are the alternatives to debt consolidation loans?

Consolidation loans can be a good way of getting on top of your debt, but they aren’t right for everyone. If you only have a few debts, and if they already have attractive APR, it might be worth concentrating on paying them off as they are – especially if you are organised enough to keep on top of them each month.

For modest credit card debts, a 0% balance transfer credit card might be a good alternative.

If your debts are substantial, you could ask your creditors to put together a debt management plan or a debt settlement.

Bankruptcy should be a last resort, because you legally declare that you can’t pay your debts. It’s only a good idea if you have exhausted all other options.

Can I get independent advice about debt consolidation loans?

The Money Advice Service is an independent body which offers free and impartial advice to people struggling with debt. Call 0300 500 5000 or visit them online.


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