Compare the cost of keeping your debts separate vs consolidating into one loan, and see which option saves you more.
Total debt: £4,500.00
Add your debts and consolidation loan terms, then click Compare Options to see which path saves you more.
Debt consolidation means taking out a single new loan to pay off multiple existing debts. Instead of juggling several payments at different interest rates, you make one monthly payment, ideally at a lower rate. This can simplify your finances and reduce the total interest you pay.
Consolidation typically makes sense when the new loan's APR is significantly lower than the weighted average of your existing debts, and any arrangement fees don't wipe out the savings. It's most effective for high-interest debts like credit cards and store cards.
The main risks are: extending your repayment term (which can mean more total interest even at a lower rate), paying arrangement fees that eat into savings, and the temptation to run up new debt on the accounts you've just cleared. Secured consolidation loans also put your home at risk if you can't repay.
Applying for a new loan triggers a hard credit search, which can temporarily lower your score. However, consolidation can improve your score over time by reducing your credit utilisation and simplifying your payment schedule, as long as you keep up with repayments.
Unsecured personal loans are the most common choice for consolidation in the UK. Secured loans (against your home) may offer lower rates but carry the serious risk of repossession if you default. Only consider a secured loan if you fully understand and accept that risk.