Home/Guides/Debt consolidation loans UK
Loans · 7 min read

Debt consolidation loans UK

Roll multiple debts into a single, lower monthly payment — when it works, why it sometimes doesn't, and how to compare secured vs unsecured options.

Last reviewed: October 2026

Key takeaways
  • ✔ Replaces multiple debts with one new loan and one monthly payment
  • ✔ Often lowers your monthly outgoings — but not always your total interest
  • ✔ Unsecured loans up to £25,000; secured loans up to £500,000+ for homeowners
  • ✔ Secured consolidation puts your home at risk — that's the trade-off
  • ✔ Only works long-term if you stop new borrowing on the cleared accounts

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

What is a debt consolidation loan?

A debt consolidation loan is a single new loan used to repay several existing debts — credit cards, store cards, overdrafts, personal loans, car finance — leaving you with one monthly payment instead of several.

The appeal is twofold: (1) lower monthly outgoings if the new loan rate or term is friendlier, and (2) administrative simplicity — one direct debit to manage instead of five.

The risk is that consolidation treats the symptom, not the cause. If you clear £8,000 of credit-card debt with a new loan, then run the cards back up over the next year, you now have £8,000 of new card debt plus the loan.

Secured vs unsecured consolidation

UnsecuredSecured
Loan size£1,000 – £25,000£10,000 – £500,000+
Term1 – 7 years3 – 30 years
Rates (good credit)Competitive for smaller sumsOften lower, plus fees
Available with bad creditLimited (high rates)Yes — specialist lenders
Asset at riskNoneYour home
Decision speedHours – 48 hrs2 – 6 weeks

For a clear breakdown of both, see our guide: Secured vs unsecured loans.

Worked example: monthly vs total cost

Imagine £15,000 of credit-card debt at 22% APR, currently costing £450/month if you're paying it down over 4 years (£21,600 total).

OptionTermMonthlyTotal cost
Stay on cards (22%)4 yrs£450£21,600
Unsecured loan @ 9.9%5 yrs£318£19,080
Secured loan @ 7.5%10 yrs£178£21,360

The secured option has the lowest monthly cost but a similar total to staying on the cards — because the term is much longer. The unsecured option saves you £132/month and £2,520 in total interest. Always compare both monthly affordability and total cost.

Illustrative only, using assumed rates. Actual rates depend on the lender and your circumstances.

When consolidation is the right move

  • You can secure a meaningfully lower rate than your weighted-average current rate
  • The new loan is genuinely affordable on a stress-tested basis
  • You commit to closing or freezing the cleared cards
  • You have a plan for what changed (budget, income, expenses) so you don't end up here again

When to look at alternatives

If you're struggling to make minimum payments, a consolidation loan may not be the right tool. Free debt advice from StepChange, National Debtline or Citizens Advice can walk you through Debt Management Plans, IVAs and other solutions you won't be charged for.

Frequently asked questions

Will a debt consolidation loan damage my credit score?
Short-term, yes — a hard credit search and a new account will cause a temporary dip. Long-term, consolidation often improves your score because it reduces your credit utilisation and shows consistent on-time repayments. Avoid running balances back up on the cleared cards.
Should I consolidate using a secured or unsecured loan?
Unsecured if your debt is under £25,000 and you have a reasonable credit profile. Secured if you need more, want a longer term to keep payments low, or have adverse credit that's pushing unsecured rates above secured rates. Secured puts your home at risk — that's the trade-off.
What about a 0% balance transfer credit card?
Often the best option for credit-card-only debt under £15,000 if you can clear it in the promotional period (usually 18–34 months). Look at the balance transfer fee (typically 2–4%) and the post-promo APR. Less flexible than a loan if you also have a personal loan or car finance to consolidate.
Will my new loan rate be lower than my existing debts?
Usually yes for credit cards (often 20%+ APR) and store cards. Less likely for existing low-rate personal loans (under 10%). Always run a total-cost-of-credit calculation before committing — a lower rate over a longer term can still cost more in total interest.
Can I consolidate debt with bad credit?
Yes, but options narrow and rates rise. Specialist secured-loan lenders consider applicants with CCJs, defaults and missed payments because the property provides security. Unsecured options for adverse credit exist but are typically limited to £5,000–£15,000 at higher rates.
Is debt consolidation always a good idea?
No. It works when it lowers your monthly cost or total interest, and you change the spending habits that caused the original debt. It backfires when people clear their cards and immediately rebuild balances — ending up with the loan AND new card debt.
Learn more about secured loans

Our secured loans overview explains the main options in plain English and shows the providers we compare. If you're struggling with debt, talk to StepChange or National Debtline first — their help is free.

Read the secured loans overview →
Important: This guide is for information only and does not constitute financial or debt advice. If you are struggling with debt, free impartial advice is available from StepChange, National Debtline and Citizens Advice. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. CleverCompare is an independent comparison and guides site — we don't lend, broker loans or give advice. More free, impartial guidance is available from MoneyHelper (moneyhelper.org.uk).