How do I get a debt consolidation loan?

How to get a debt consolidation loan 

There are typically five stages to getting a debt consolidation loan:  

1. Preparing to apply
2. Checking your eligibility
3. Applying for a loan
4. Paying off your existing debts with the loan
5. Repaying the loan 

1. Preparing to apply for a loan  

Assess your financial situation 

Before applying for a loan, check if there are any changes you can make to boost your chances of approval. For example, you could improve your affordability by creating a budget and cutting out nonessential outgoings. 

Check your credit report  

You can check your credit score and report for free using the three UK credit reference agencies, Experian, Equifax, and TransUnion. This helps you understand what information lenders can see when you apply for credit. Plus, it allows you to spot and flag any mistakes that could hinder your application.   

If you have poor credit, you could consider taking out a bad credit loan to consolidate your debts. These loans are easier to get approved for but tend to come with higher interest rates than regular consolidation loans. 

Or you could take steps to improve your credit score and then apply for a loan in the future. For example, registering to vote and limiting credit card spending can boost your rating. 

Read our tips on how to boost your credit score fast. 

Consider your loan options  

Before making an application, there are some important things to check, such as:

• The amount you want to borrow – and whether it covers all or some of your existing debts.
• The monthly payment amount - and whether it’s affordable.
• How long you want to repay the loan for - if you spread your repayments over a longer term, you could pay less each month, but you may end up paying more in total.
• The proposed interest rate - compared to the interest rates on your current debts.
• Any additional fees or charges – such as early repayment charges if you pay off the loan before the end date. 

If you only have credit card debt, you may wish to apply for a balance transfer credit card instead of a loan – especially if you qualify for a lower interest rate or owe a small amount. 

2. Checking your eligibility 

Your eligibility for a debt consolidation loan depends on your individual circumstances and the lender.  

Each UK lender has their own criteria, but most will require you to be a UK resident aged 18 or over. They will usually look at other factors such as your credit history, employment history, and affordability. 

You can use an eligibility checker to find out whether you qualify without affecting your credit score. This means you don’t make multiple credit applications in a short space of time, as this will cause your rating to dip temporarily. 

3. Applying for a debt consolidation loan 

When you apply for a debt consolidation loan, you’ll need to provide:  

•    Personal details – e.g., full name, date of birth, and address history  
•    Employment information – e.g., name of employer, occupation, and income  
•    Amount you need to borrow 
•    Reason for applying – e.g., to consolidate debt, to make home improvements 

Required documentation may include:  

•    Proof of ID – such as a passport or driving licence  
•    Proof of address – such as a utility bill (usually dated within the past three months)  
•    Proof of income – such as recent payslips or bank statements 

The lender will use this information to review your circumstances and perform a hard check on your credit report. This will give them an idea of how risky it’d be to lend to you, based on your past financial behaviour. 

4. Paying off your existing debts