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Debt Consolidation

Some people get into financial difficulty simply because they have too many credit commitments to keep track of each month, others because they fail to keep up repayments on short-term, high interest debts such as credit and store cards. 


Debt consolidation is the process whereby a single, larger loan is taken out to pay off all existing debts. This can either be through secured borrowing against an asset such as your home (remortgage) or through further unsecured borrowing. Typically, consolidating your debts will enable you to secure a lower rate of interest, which means you’ll have only one, lower monthly repayment to make each month. 


You need to think carefully if your debts are very large because even a low interest rate may not reduce your payments enough (and if you have a poor credit history you won’t get a low interest loan). As with any loan, it’s important to make sure that the terms are right and that you really can afford the repayments.


Debt consolidation can work for some people, but it’s important not to give in to temptation and start building up new debts while you’re paying off your old ones. Cut up your credit cards! You also need to bear in mind that paying back your debts over a longer period of time may mean that they cost you more in total. 


If you require debt advice, there's no need to wait or book an appointment, our Advisors are available Monday to Friday 8am to 8pm and Saturday 9am to 5pm on 0800 043 40 50.



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The advantages of consolidation loans 

  • Your debt will be in one place, so you can keep track more easily. 

  • By repaying over a longer period, your monthly payments will come down. 

  • Your home is not at risk if you can keep up payments. 

  • Friends, colleagues and family don’t have to know about it. 

The disadvantages of consolidation loans 

  • A longer loan, even on better terms, can mean you pay more in the end. 

  • For larger debts, the new repayments may still be unaffordable. 

  • In the current financial climate, with house prices falling and unsecured loan criteria being tightened, it's very difficult to get a consolidation loan.