A debt consolidation loan lets you borrow money, to pay off all your existing debts. By merging all the money you owe into one, consolidation loans let you switch to just one monthly repayment to a single lender. It can be used to pay off credit cards, store cards and other personal loans.
Can you get an unsecured debt consolidation loan?
Most debt consolidation loans are only available to homeowners. But unsecured consolidation loans can still save you money on your debts, and you don’t need to own a property to get one.
Unsecured consolidation loans are not secured against anything you own, such as a property or vehicle.
Use our comparison table to find an online personal loan, which you can use to consolidate debt.
How to get the right debt consolidation loan
When you start looking for a debt consolidation loan, there are a few steps you can take to make sure you get the right one for your needs.
If you’re thinking of consolidating debt …
Decide how much you need to borrow: Add up all the debts that you want to pay off with your debt consolidation loan. Don’t forget to include any extra charges you’ll need to pay to pay your debts off early.
Think about how long you’ll need to pay it back: The longer you take to pay back your debt consolidation loan, the lower your monthly payments will be. But, of course, the longer you take to pay it off, the more you’ll end up paying back overall.
Look for the lowest interest rate: The interest rate is the biggest cost on consolidation loans, so it’s important to find the lowest rate you can. Lenders advertise their representative APR, but that’s just the rate they promise to give to 51% of borrowers. The rate they offer you could be higher or lower depending on your credit history and other factors.
How much can I consolidate?
An unsecured debt consolidation loan is essentially just a personal loan – and many people use them as loans to pay off debt. Debt consolidation loans go up to £25,000. That means you could consolidate up to £25,000 of debts using an unsecured debt consolidation loan.
How long can I borrow for with a debt consolidation loan?
You’ll find that debt consolidation loans, UK wide, usually offer terms of between one and five years.
If you think you’ll need longer to pay back your debt consolidation loan, it’s worth remembering that some lenders offer loan terms of up to seven years. But you’d only be likely to get such a long term if your consolidation loan is over £10,000.
Our loan repayment calculator can help you to see how changing the term can affect your monthly payments. By trying out different options with a range of debt consolidation loans, you can see if debt consolidation is suitable for you.
How do consolidation loans affect my credit rating?
As long as you keep up with the repayments on your debt consolidation, you’ll be fine. In fact, you’ll improve your credit score by lowering your debt.
But, if you don’t keep up with the repayments, it will negatively affect your credit rating. So you need to make sure you find a debt consolidation loan you can afford.
How can I get the cheapest debt consolidation loan?
It’s only worth doing debt consolidation if you can find a debt consolidation loan that gives a cheaper interest rate than you’re already paying.
Although there are no best loans, our comparison can help you compare debt consolidation loans, and find the deal that is right for you. Check out consolidation loans, UK wide, and compare interest rates. Then get your own quote from each lender.
Are there alternatives to a debt consolidation loan?
If you’re wondering how to consolidate debt, consolidation loans can be a good place to start. But debt consolidation isn’t your only option. Even the best consolidation loans might not be the best way to consolidate debt, depending on your situation. It’s sensible to look into alternatives as well.
You could look at opening a 0% money transfer card, for example. You can use these to move money into your back account, for a small transfer fee. And then you pay them back, interest free, over a set amount of time.
Or, you could think about opening a 0% balance transfer card. These are good for people with credit card debts. You can move what you owe onto a single, new card, for a small fee. Then you can pay them back, interest free, over a set period of time.