Debt consolidation means combining multiple debts into a single loan, typically at a lower interest rate. It can simplify repayments and reduce total interest paid.
When it can help
- You have multiple high-interest debts (credit cards, store cards, overdrafts)
- You can get a consolidation loan at a lower rate than your existing debts
- You're committed to not running up the debts again after consolidating
The risks
- Secured loans: consolidating into a loan secured against your home puts your property at risk if you can't repay
- Longer term = more interest: lower monthly payments over a longer period can mean paying more interest overall
- Behaviour: consolidating then running up new debt is a very common trap
Free, confidential advice on managing debt is available from StepChange (0800 138 1111) and National Debtline (0808 808 4000). Never use paid debt management companies when free help is available.