Is a debt consolidation loan right for me?
Taking out another loan is rarely the solution to a serious debt problem. In reality, a debt consolidation loan will only increase the amount that you owe (the refinancing needs to cover the existing debts plus the interest on the new loan) and stretch the payments out over a longer period.
This type of loan can be an appropriate solution in some circumstances, for example:
- when consolidating a relatively small amount of debt (usually lots of smaller debts with high interest rates, such as credit cards),
- which reduces the monthly repayments to an amount that allows you to meet your monthly living costs and still pay back the debt within a reasonable timeframe.
If you’re considering securing a debt consolidation loan against your home, you should always look at remortgaging first, as the repayment terms will often be more favourable.
You can read more about Debt Consolidation and whether it is suitable for your situation in our Debt Consolidation section.
Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including Debt Consolidation. If you need to talk to someone about Debt Consolidation or would like to discuss the alternatives, please call to speak to an adviser.