I can't get a consolidaton loan - what should I do?

If you can’t get a consolidation loan you should focus on reducing your debts as much as possible and building up your credit score. Alternatives to a debt consolidation loan include balance transfer credit cards or a debt management plan, for example.

5 min read
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Steps to take if you’ve been declined 

If you can’t get a consolidation loan, there are several different steps you can take to improve your situation.

1. Ask the lender why 

In order to understand what you need to work on, you need to know why you were declined. Contact the lender you applied with and ask them why – they’ll be able to tell you which areas you need to improve on.

There are three main reasons why people get rejected for credit:

  1. low income - the lender thinks you can’t afford the repayments
  2. too much existing debt - they don’t want to put you into further financial difficulty
  3. low credit score – they think it’s too risky to lend to you

Even if you think you know why you’ve been rejected it’s still worth checking with the lender in case there’s something you’ve missed.

2. Create a budget 

Budgets are a good idea anyway, but they’re crucial if you’re trying to manage multiple debts. If you can’t get accepted for a consolidation loan you need to ensure you can manage your existing debts.

Missing payments and late payments incur late fines and damage to your credit score, so it’s worth budgeting to make sure that doesn’t happen.

One way to do this is to use a spreadsheet to make a list of your monthly (or weekly income) and your fixed expenses, like rent and bills. Estimate your variable expenses as well, such as food shopping and petrol. Then deduct the expenses from your total income.

For example, if you earn £1,200 per month, your fixed expenses are £700 and you need £300 for variable expenses, you have £200 left over to repay your debts.

3. Reduce your debt 

You can use the money left over from your budget to start reducing your debts by choosing a payment strategy:

  • debt avalanche is where you focus on paying off the debt with the highest balance first - then the next highest (and so on)
  • debt snowball is where you focus on paying off the debt with the lowest balance first – this means you eliminate a single debt the quickest but may end up paying more in interest (as the larger debts won’t be going down as fast this way)

Whichever method you choose, it’s important to make at least the minimum repayment on ALL of your debts to avoid late fees and damage to your credit score.

Remember, you’ll need to clear your priority debts first. These include bills such as your rent or mortgage payments, council tax, bills, unpaid tax and payments for goods bought on purchase hire. Non-priority debts are things like unsecured loans, credit cards and store cards. If you’re unsure which of your debts are priority you can seek information from Citizen’s Advice.

4. Seek free debt advice 

If you’re struggling to meet the repayments on your debts, consider seeking free confidential advice from debt charities like StepChange.

They can help you negotiate with the lenders to reduce your monthly repayments into a more manageable amount. It’s important to note that reduced repayment plans will mean it takes longer to repay your debt and can negatively affect your credit score.

5. Build up your credit score  

To build up your credit score, you should:

  • fix any mistakes on your credit report to make sure it’s accurate and up to date
  • put your bills in your name and pay them on time and in full
  • avoid making multiple credit applications in a short space of time
  • lower your credit utilisation ratio by paying off as much of your debt as you can, so you’re not maxing out your credit limits on credit cards and overdrafts

6. Use eligibility tools to shop around 

Once you’ve built up your credit score, you can start looking around for a debt consolidation loan to see if you can get a more competitive deal. We suggest you use an eligibility checker to see whether you’re likely to be accepted for a loan without leaving a footprint.  

7. Space out your credit applications 

Since applying for multiple forms of credit can harm your credit score, you should space out your credit applications as much as possible. Only apply once you’re sure it’s the deal you want and when you’ve used an eligibility checker and know you’re likely to be accepted.

8. Consider alternative options 

If you have a particularly low credit score it might not be possible for you to take out a debt consolidation loan for a long time. But don’t worry, there are other options out there:

Balance transfer credit cards

These are designed to help you consolidate your other debts – just be careful with these because they can carry high interest rates and usually come with transfer fees

Remember, if you consolidate your existing borrowing, you may be extending the term and increasing the amount you repay in total.

Credit counselling

This is a programme for people who are struggling with debt where you sit down with a counsellor and create a repayment plan – just be aware that your repayment plan will include a fee for the counsellor

Debt management plan

A debt management plan is when a debt management company negotiates a reduced repayment plan with your creditors. It’s important to note that the debt company will take a cut from your repayments as a fee – unless you go through a free debt charity, like StepChange. This will have a negative impact on your credit score and stay on your file for at least 6 years


This option is available is where you absolutely can’t pay your debts and apply to go insolvent to get them written off. This should be a last resort because it has a serious impact on your credit score and stays on your file for the next six years

How does a declined loan affect my credit score? 

The outcome of your application doesn’t actually affect your credit score. In fact, your credit score dips whether you’re accepted or not because the act of applying leaves a footprint on your credit report.

Making multiple applications in a short space of time will damage your credit score more significantly because this can give lenders the impression that you’re desperate for credit and struggling to manage your finances.