Money Wellness

Looking for debt consolidation?

Debt consolidation may involve taking out a loan to pay off your debts. If you’ve got money problems, borrowing more may not be the best way forward. There are other ways to clear your debts without a loan.

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What is debt consolidation?

If you owe money to lots of different creditors and you’re struggling to keep up with your repayments, you might be considering a debt consolidation loan. With this type of loan, you borrow enough money to pay off all your other debts. You then owe money to just one lender.

There are two types of debt consolidation loan:

unsecured – these loans aren’t secured against a possession (such as your home or a car). This means if you miss payments, you’re not at risk of losing that possession.

secured – these loans are secured against a possession (such as your home or a car). If you miss payments, you could lose that possession.

If you’re already struggling to manage your debts, borrowing more in the form of a debt consolidation loan may not be a good idea. If this is the case, you probably need help sorting your debts rather than a new loan.  

You should only consider a debt consolidation loan if: 

  • it means you end up paying back less than you would have done (you could pay more overall if have to make payments for longer) 
  • it’ll let you reduce your spending and sort your finances out 
  • you can afford to make the all the repayments 

Remember to check that any savings you expect to make aren’t cancelled out by charges and fees. 

Even if you have bad credit, you may be able to get a debt consolidation loan. It’s generally easier to get a secured debt consolidation loan than an unsecured one. This is because a secured debt consolidation loan use a possession – usually your home – to reduce the risk for the lender. But if you miss payments, you could lose that possession.  

Taking out a secured loan is a big decision and one that shouldn’t be made lightly. If you’re already struggling with money, you made need debt help rather than a new loan. 

Most non-priority debts can be paid off by a debt consolidation loan. A debt is classed as either priority or non-priority depending on how serious the consequences are if you don’t pay.  The consequences of not paying non-priority debts are less serious than for priority debts. Despite being less serious, your creditors could still take you to court or arrange for bailiffs to visit you. The main non-priority debts covered by a debt consolidation loan are: 

  • Credit Cards
  • Payday Loans
  • Store Cards
  • Overdrafts
  • Personal Loans
  • Lines of Credit
Money Helper

If we are unable to help you with all of your debts, or for further information and support to help you with your money troubles, please visit MoneyHelper.

Is debt consolidation right for me? 

You should only really consider borrowing more to pay off your debts if:

  • It’ll reduce the amount you pay back overall

  • It helps you get back on track with your money

  • You’re sure you can afford the repayments

How debt consolidation works & things to consider?

If you’re struggling to keep up with debt repayments, borrowing more might not be the best option for you.
Here are some things to think about:

Debt consolidation requires you to borrow more money/credit to repay your original debts and leaves you with one bigger combined debt that you then repay.

There is usually fees and charges applied when consolidating your debts for taking out the additional credit/loan.

If you are thinking about debt consolidation to help you manage your debts, you should also consider the benefits of managing all your debts through a debt solution.

There are different solutions to suit your needs and circumstances and they will allow you to make one affordable monthly payment.

We’ll need to check if our solutions are suitable for you. If not, we’ll suggest other ways you can deal with your debts.

As you’ll be making reduced payments, you'll be breaking your credit agreements.

Depending upon the solution, there may be restrictions. We'll only recommend a solution that's right for your circumstances.

Some solutions are free, others come with a fee.

Advisor Image

Expert verdict: Consider all options to deal with your debt

It's important to have the full picture of all the options available to deal with your debt before making a decision. Talk to a debt adviser before taking out a consolidation loan.

Katrina – Debt advice specialist 
Money Wellness

But don’t take our word for it...

Why choose us?

Our expert debt advisors have helped thousands of people in a similar situation to you. We'll listen and do not judge.


A debt consolidation loan may hurt your credit rating in the short or medium term. There are a number of reasons for this: 

  • When you apply for a loan, the lender will carry out a hard credit check. This may lower your credit score by a few points. 

  • Opening a new loan account temporarily lowers your credit score. This is because lenders see new credit as a new risk. 

In the long term, if you make your payments on time and in full, your credit score should start to rise. Your payment history has the biggest impact on your credit rating, so paying on time is key. If you’re concerned you might not be able to manage the repayments on a debt consolidation loan, it’s a good idea to get debt advice first.

This depends on your situation. Lenders will carry out checks before offering you a debt consolidation loan. They’ll want to see that you can afford the repayments.  

It may be easier to get a secured debt consolidation loan than an unsecured one. This will involve using one of your possessions as security (e.g. your home or car). If you miss payments, you could end up losing that possession.  

If you’re considering a debt consolidation loan because you’ve struggling to manage your money, it’s probably a good idea to get debt advice before taking on more borrowing. 

Could I be turned down for a debt consolidation loan? 

As with all forms of borrowing, lenders will do certain checks before they agree to offer you a debt consolidation loan. The most common reasons for being turned down for a loan are: 

  • not having enough income to cover the repayments 

  • having too much debt for the loan 

  • a poor credit score  

If any of these reasons apply to you, debt help may be a better option than looking to borrow more. 

Debt consolidation loans tend to be a bit more expensive than other comparable loans. The main cost with a debt consolidation loan is the interest that gets added to your debt. Lenders will advertise a representative interest rate. It’s important to remember that the rate you get might be different to the one advertised.  

Apart from the interest, there aren’t usually any other fees and charges with a debt consolidation loan. But you may end up being charged fees on the debts you’re consolidating, as you’ll be paying them off early. 

Yes, you can use a debt consolidation loan to pay off credit cards. A debt consolidation loan can be used to pay off most non-priority debts. These include things like: 


  • store cards 

  • buy now pay later 

  • credit cards 

  • catalogues 


If you’re considering taking out a debt consolidation loan because you’re in financial difficulty, it’s a good idea to get debt advice first. Borrowing more could make your problems worse if you don’t keep up with the repayments. 

There is no set amount of debt you need to consolidate to get a debt consolidation loan. To qualify lenders will simply need to be convinced that you’ll be able to afford the repayments. If there is any doubt in your mind about being able to afford the repayments, you should get debt advice first. Borrowing more may not be the best way forward if you’re already struggling with debt.

For a debt consolidation loan to work, you need to be disciplined. You have to be absolutely certain that you can afford the loan repayments as well as all your other living expenses. If you end up having to take out more credit, you could end up with serious debt problems.  


Before taking out a debt consolidation loan, it’s a good idea to get debt advice to find out if there are any better solutions available. 


You can get both secured and unsecured debt consolidation loans. For an unsecured loan, you won’t be asked to put up a possession (e.g. your home or your car) as security. That means if you miss payments, you’re not at risk of losing your home or car. With secured loans, the possession you use as security will be at risk if you miss payments.

A wide range of debt solutions and services

It may be that a debt relief order isn’t quite right for you and another debt solution is more suitable. We’ll make sure we recommend the one that’s best for your individual circumstances and your long-term financial wellbeing.

You can find more information below on alternatives to a DRO.

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