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5 different ways you can consolidate debt

author: Bryony Pearce

By Bryony Pearce

The world of debt consolidation can be daunting if you don’t know your options, so we’ve covered five avenues you could take.

There are a number of benefits to consolidating your debts into one, single, streamlined payment. It takes the stress out of remembering several interest rates. And it removes the confusion of keeping up with multiple payment dates.

When it comes to debt consolidation, there are several options available – and which one’s most suited to you will depend entirely on your own unique circumstances, like: how much collective debt you have, your credit history, and how much you can afford to repay each month. So, let’s take a look at what options are on the table...

Debt consolidation loans

If you’ve got outstanding credit on anything from credit cards, store cards, to overdrafts and loans, a personal or secured debt consolidation loan could be used to merge all your payments into one, monthly sum.

The amount you’re able to borrow will vary from lender-to-lender but, to give you a rough idea, you can usually borrow between £1,000 and £15,000 with a personal loan, and between £10,000 and £250,000 with a secured debt consolidation loan.

However, to be eligible for a secured loan, you must own your own home and have enough equity available as this will be used as collateral against the loan – should you fail to repay what you owe.

With either type of debt consolidation loan, you take out however much is needed to cover the cost of your debts, pay each of them off, and then stick to the single, monthly payments as per the agreement of your new loan.

Debt consolidation loan pros

  • you owe one lender, one sum
  • you have a single date each month that money comes out
  • you can consolidate multiple types of credit

Debt consolidation loan cons

  • interest may be higher if your credit history has deteriorated since you took out the debts you’re looking to consolidate
  • if you take out a secured debt consolidation loan and fall behind with your repayments, your home could be at risk
  • you need to choose one single term, which may extend some debts, meaning you will pay more interest in total

Balance transfer card

If you’re only looking to consolidate debt that you’ve racked up on credit cards and/or store cards, then a balance transfer card could well be a viable and cost-effective option for you.

Many balance transfer cards come with a 0% introductory period, meaning you don’t have to pay any interest for a limited period (hence the cost-effectiveness). However, once this period ends, you’ll have to pay interest – so it’s really important that you check what the interest rate will be after the deal ends - before you take out a balance transfer card. You may also have to pay a balance transfer fee. Typically these are around 3% of the balance you transfer.

Balance transfer card pros

  • if used wisely, it can be a cost-effective way to consolidate debt#
  • if you don’t have to pay interest, you could get out of debt sooner if you carry on making the same payments

Balance transfer card cons

  • they can’t be used to consolidate loans or overdrafts
  • if you have a bad credit history, you may not be offered the 0% introductory rates
  • you’ll be charged the lender’s own rate once the interest-free period ends
  • you may be charged a fee to transfer the amount over

Money transfer card

Money transfer cards work slightly differently. Instead of taking out a new card to pay off existing cards, overdrafts or loans, the money transfer card deposits cash straight into your current account.

As with balance transfer cards, many money transfer cards come with a 0% introductory offer (credit history permitting), making them another cost-effective option.

To really make the most of both cards though, in an ideal world, you need to make sure you pay off what you owe before the 0% introductory offer ends – the length of these periods will vary from lender-to-lender.

Money transfer card pros

  • if you pay your debt off before the introductory offer ends, it’s a cheap way to consolidate debts
  • the money you save on interest can help you become debt-free quicker
  • they can be used to consolidate any type of debt

Money transfer card cons

  • you’ll be charged a balance transfer fee of around 3% of the amount you’re transferring
  • if your credit history is less-than-perfect, you might not be eligible for interest-free offers
  • once the interest-free period ends, you’ll be subject to the lender’s interest rates

Friends or family

If you’ve got loved ones who have enough cash lying around and are financially stable enough to loan some out, they could be another avenue worth exploring.

Odds are, you won’t be asked to pay interest – at all – or pay transfer fees. Therefore, it could be a truly free way to consolidate debt.

If you’re considering this option though, it’s incredibly important that you don’t put anyone else’s finances at risk by doing so, and you’re absolutely confident in your ability to repay your friend or family member in full. Failure to do so could result in bad blood and damaged relationships – something neither of you would want, we’re sure.


If you’ve got a pot of savings you can turn to, this could be another money-saving option worth exploring.

While you’d benefit from not paying interest or transfer charges, bear in mind you wouldn’t be earning interest on the money you take out of your savings account, though.

Another point worth considering is ensuring that you still have enough stashed away for an emergency (like if your boiler or car broke down, for example). If you don’t and the worst should happen, you could find yourself in the position of needing to take out additional credit to cover the cost.

So, there are five possible options you could exploit to consolidate your debts. As with any financial decision, remember to fully research all avenues and weigh up the pros and cons before you reach a final decision. 

Disclaimer: All information and links are correct at the time of publishing.

author: Bryony Pearce

By Bryony Pearce

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