How to consolidate debt

Debt consolidation is where you combine all of your debts into a single monthly repayment via one credit provider. Often, people do this via a debt consolidation loan, but other options include a balance transfer credit card, a secured loan or a personal loan.

7 min read
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What are my main options for debt consolidation? 

The four main options for debt consolidation are:

Which option you’re eligible for will depend on your financial history and your credit score.

It’s important that you consider whether debt consolidation is right for you, as well as which course of action best suits your personal circumstances, in order to make the best decision.

Consider the pros and con of each debt consolidation option carefully before making a credit application.

1. Debt consolidation loan 

A debt consolidation loan is a loan you take out to pay off your debts. This leaves you with a single debt to pay each month. There are two main types of debt consolidation loan: secured (against your property) and unsecured.


  • multiple debts are combined into one – which should make it a lot easier to budget
  • you may find lower interest rates - compared to the interest rates on your current debts
  • pay a lower amount overall – depending on interest rates, how much you borrow and for how long
  • your credit rating should improve - as long as you make your monthly payments on time and in full


  • unaffordable repayments – if you can’t afford the repayments on your new loan, you’ll end up being charged fees and sliding further into debt. Make sure the repayments are realistic before taking out a loan
  • you might not be eligible to borrow the amount you need - if this is the case, you’ll be adding another debt to the pile rather than clearing them in full
  • high interest rates – you could end up paying more interest on a debt consolidation loan, so make sure you do your sums and shop around before you apply
  • paying more overall - if you’re paying back a debt consolidation loan over a longer period of time you may end with a higher total cost

2. Balance transfer credit card 

A balance transfer credit card is a credit card that allows you to transfer money to pay off your other debts. You’d then have one credit card to pay each month – instead of multiple debts.


  • all your debts in one place and one monthly repayment - this might be less stressful for you to deal with than several repayments to various companies
  • your credit rating might improve - if you only have one credit card to pay off it might look better to other financial companies
  • some credit cards have 0% interest on balance transfers - these are usually introductory offers that last for a fixed period before the interest rate goes up


  •  many credit cards charge fees and interest - for balance transfers, for example
  • your credit limit might not cover your debts - this means that the credit card you take out won’t let you consolidate all your debt
  • 0% introductory rates only last for a fixed period – once it finishes the interest rate and/or balance transfer fees might be very high on any remaining balance

3. Personal loan for debt consolidation 

You could take out a personal loan to pay off your debts early and then pay the loan back with a single monthly repayment plan.


  • personal loans are unsecured - so there’s no risk to your assets, such as your house or car
  • your credit utilisation ratio will reduce - because unlike credit cards and overdrafts, personal loans don’t count towards your credit utilisation ratio
  • you could pay less overall – if you can access lower interest rates


  •  you might pay a higher interest rate – so it’s best to check if you will make a saving before you apply
  • your loan might not cover your debts – depending on how much you can afford and are eligible to borrow

What is the difference between a personal loan and a debt consolidation loan? 

There isn’t much difference between a personal loan a debt consolidation loan because most loans can be used for debt consolidation. The main difference is that debt consolidation loans are usually offered by financial companies who specialise in debt consolidation. Whereas a personal loan can be used for a variety of purchases and isn’t tailored to debt consolidation.

Remember, you could consider a secured debt consolidation loan where you property is used as collateral. With this added layer of security, the lender may be more willing to lend you larger sums with lower interest rates. However, your home could be repossessed if you fall behind with your repayments.

What are the alternatives to debt consolidation? 

If you’re struggling with debt and are worried about meeting your monthly repayments, debt consolidation might not be the best option for you. It depends if you can afford to make the repayments on a debt consolidation loan and what solution would best suit your circumstances. Alternatively, you could speak to your creditors or a debt charity - or consider a debt management plan.

1. Dealing with your creditors directly 

Speak to your creditors directly if you’re struggling to keep up with your debt. They might be able to restructure your repayments to make them more manageable. Just remember that if you reduce your monthly repayments, you’ll end up taking longer to pay back the money you owe and it can affect your credit score.

2. Contacting a debt charity 

Debt charities like StepChange offer free confidential advice for people who are struggling with debt. You could also arrange an appointment with your local Citizen’s Advice.

3. Setting up a debt management plan 

A debt management plan is an option if you’re struggling to make repayments. This is where you instruct a debt management company to liaise with your creditors on your behalf, to arrange a reduced monthly payment plan.

Remember you’ll still have to pay off the full amount and fees may apply (unless you use a free debt charity like StepChange). You’re usually eligible for a debt management plan if you can’t afford your monthly repayments and you don’t have enough disposable income to pay off your debts within six months.

Check your eligibility for a debt consolidation loan

  • Reduce your monthly payments
  • Personal and homeowner loans available
  • Getting a quote is FREE and won't affect your credit score
Find my loan

Intelligent Lending Ltd is credit broker, working with a panel of lenders. Homeowner loans are secured against your home.

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