Debt consolidation and credit

Key facts

How much debt must I owe? There is no minimum or maximum level of debt. It will depend upon what the lender is prepared to lend.

What type of debt? Any debts that your lender allows you to include.

How long will it last? ​It will last the length of time it takes you to repay the loan.

How it works

See our fact sheet:

Debt consolidation and credit

Apply to a lender for a loan to clear debts. These are often advertised as ‘consolidation loans’. The lender may want to secure the new loan on your house if you own property.

It is very important that you shop around for the best deal from high street and internet lenders. If you are viewed as a poor credit risk, it is possible that a good deal may not be available to you.


  • Paying off your debts with a consolidation loan is less likely to have a negative impact on your ability to get further credit.
  • You will be making one monthly payment on one loan, rather than many payments to different creditors.
  • Your new monthly payment should be lower, but you must check that you can afford the new payments.


  • If you are viewed as a poor credit risk you may not be able to take out a consolidation loan, or you may be offered one on worse terms and conditions, for example at a higher interest rate.
  • If the loan is secured on your house, then it could be repossessed if you do not keep up with the payments.
  • Interest rates often change over the loan period, making it impossible to work out what the total cost of the loan will be.
  • Check if the interest is ‘fixed’ or ‘variable’. If it can change, you could end up paying much more than you expected.
  • Loans are often offered over a longer time than your original loans. This means that, even if the interest appears reasonable, the length of time you have to repay can increase the overall cost of the loan significantly. This means that in the end you pay more.
  • If you don’t clear all your existing borrowing, then you may struggle to make the payments.
  • If you keep your credit cards, it may be tempting to use them again.
  • If you did not use Your budget to make a full budget, listing your income and outgoings, you may not have worked out if you can realistically afford the new payments.