Debt Consolidation

Debt consolidation simplifies your finances by combining multiple debts into one, allowing you to manage payments to multiple creditors through a single arrangement.

What Is Debt Consolidation?

Debt consolidation involves merging multiple debts into a single solution. This approach is especially beneficial for individuals who owe money to several creditors, as managing multiple debts can become overwhelming and confusing.

If you're in debt and dealing with multiple lenders, choosing a solution that allows you to address them collectively could be advantageous. There are various methods for consolidating debts, making it worth exploring if you're finding it challenging to regain control of your financial situation.

What Are My Options for Consolidating Debt?

Debt consolidation can be achieved through various methods to simplify your financial management. However, it's essential to recognize that not all types of debt are the same, and certain debts may not be eligible for consolidation under specific schemes. Before making any decisions, consider which option best fits your personal situation. Here are some of the main solutions that facilitate debt consolidation:

This allows you to consolidate certain debts into an agreement where you make a single monthly payment towards all of them, with the remaining balance potentially written off.

If you have little to no ability to repay your debts, you can apply for bankruptcy, which may allow your debts to be written off after one year. However, your assets might be sold to help pay your creditors.

This option lets you freeze your debts for a year, after which eligible debts may be written off.

You can combine eligible debts into a single monthly payment managed by a third-party company, which will distribute your payments toward your debts and cover their fees.

Debt Consolidation Loans

One method for consolidating your debts is through a Consolidation Loan. This involves opening a new account and using the credit from that account to pay off existing credit card and loan debts. By doing this, you may be able to close some accounts or at least lower the amounts owed on them. While this does not reduce your total debt, as you will still owe money on the new account, it can simplify your financial management by reducing the number of creditors you have to deal with.

When you pay off multiple old accounts by borrowing credit, you're essentially transferring those debts to your new account. This way, instead of managing numerous creditors, you consolidate everything into one.

It's important to note that a Consolidation Loan does not decrease your overall debt; it merely relocates it to a single account.

You must keep up with payments on your new account to avoid falling into further financial difficulty. Carefully evaluate your monthly repayment amounts to ensure this option is affordable for you.
Opening a new account requires a 'hard' credit search, which can negatively affect your credit score. However, maintaining regular repayments is the best way to gradually improve your score as your overall debt decreases over time.

Become debt-free

Are you finding it hard to manage your debt?

Complimentary Credit Inquiry

If you are thinking about debt consolidation, it's beneficial to clearly list all your outstanding debts and identify your creditors.

If you’re unsure about your debt information, there’s no need to worry. At Money Advice, we can help you retrieve details about your debts. We offer a complimentary ‘soft’ credit search, which will reveal the outstanding debts linked to your name.

The benefit of a soft credit search is that it doesn’t leave a mark on your credit file; only you will know it has been conducted. This quick process provides us with valuable information, allowing us to better assess which solutions you may qualify for.

We utilize the major credit agencies in the UK for these checks, including:

Debt Consolidation FAQs

What’s debt consolidation?

There are two options when it comes to debt consolidation:

The first option involves finding a solution that allows you to combine your debts and manage them collectively, typically making one payment to multiple creditors at once.

The second option is a Debt Consolidation Loan, where you borrow funds from a lender to pay off multiple debts, leaving you with just the new lender to deal with.

Can all my debts be consolidated?

The debts that can be involved in consolidation will depend on the type of solution you go for. Not all debts may be covered, so make sure you know exactly what lenders you will need to keep up repayments to before choosing a solution. If you take out a consolidation loan, it would be up to you to decide which debts you would like to deal with and pay off first.

What are the benefits of debt consolidation?

Benefits of debt consolidation include the ability to streamline your repayments, making them more manageable. Additionally, certain solutions ensure that your creditors are prohibited from contacting you while you navigate the process.

What are some disadvantages of debt consolidation?

There are several points to consider when thinking about consolidation.

With a consolidation loan, it’s essential to remember that you aren’t eliminating your debts entirely—you still owe the same total amount, just to one new lender. Additionally, these loans often come with high fees and interest rates.

Should I get a consolidation loan?

A consolidation loan may be a suitable option in certain circumstances, but it’s not always the answer. If you have struggled to repay your existing debts, you mey struggle to pay back the consolidation loan you have taken out, plus the interest that this may generate.

RMS Financial assists over 3,000 individuals in the UK each year.

Our team of specialists helps thousands of families regain control of their finances through an IVA.

Is an IVA the right choice for you?

We can evaluate your eligibility for an IVA.

Would you rather discuss this later?

We are here to provide support in helping you find a solution.