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Debt Consolidation

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Debt Consolidation involves combining multiple debts into one single loan or repayment plan, so you make just one affordable monthly payment instead of juggling several bills. It can simplify your finances, potentially lower your monthly outgoings, and make budgeting easier — without the need for formal insolvency.

At RMS Financial, we offer clear, no-obligation advice to help you understand if debt consolidation is the right option for your situation — or if a Debt Management Plan, IVA, or another solution might be more suitable. We support you every step of the way.
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What is Debt Consolidation?

Debt consolidation is a way of bringing together your existing unsecured debts (such as credit cards, loans, and overdrafts) into one new loan or repayment arrangement. This replaces multiple payments with a single monthly payment to one lender, often at a fixed interest rate.
It is not a debt write-off solution like an IVA or bankruptcy, but it can reduce stress, simplify your budget, and sometimes lower the total interest you pay — provided you qualify for a competitive rate. It is a popular first step for people who can still afford to repay their debts in full but need better control.
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How does Debt Consolidation work?

The debt consolidation process generally follows these key steps:
  • Professional debt advice: We review your full financial situation, including income, expenses, existing debts, and credit score, to see if consolidation is realistic and beneficial.
  • Calculate affordability: We help you determine a realistic monthly payment that fits your budget after essential living costs.
  • Apply for a consolidation loan: You apply for a new personal loan (unsecured or sometimes secured) large enough to pay off your current creditors in full.
  • Pay off existing debts: The new loan clears your old debts, leaving you with just one repayment to manage.
  • Make one monthly payment: You repay the consolidation loan over an agreed term (typically 1–7 years) at a fixed rate.
  • Ongoing support: We guide you through the process and help monitor your situation if circumstances change.

Is Debt Consolidation suitable for me?

Debt consolidation may be a good option if you:
  • Have multiple unsecured debts and are struggling to keep up with different payments and due dates
  • Have a steady income and a reasonable credit score that could qualify you for a lower interest rate than your current debts
  • Want to simplify your finances into one fixed monthly payment without entering a formal insolvency solution
  • Prefer to repay your debts in full over time rather than seeking partial write-off
It works best when you can afford the new consolidated payment comfortably and avoid taking on new debt. We always provide honest advice and compare it against other options so you can make an informed choice.
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What debts can be included in Debt Consolidation?

Most unsecured, non-priority debts can usually be consolidated, such as:

  • Credit cards and store cards
  • Personal loans
  • Payday loans and short-term loans
  • Overdrafts
  • Catalogue debts

What debts cannot usually be included?

Certain debts are typically not suitable for standard debt consolidation loans, including:

  • Mortgage or secured loan arrears (these are usually handled separately)
  • Council tax arrears
  • Income tax, VAT, or other HMRC debts
  • Child maintenance payments
  • Court fines and certain student loans
  • Debts incurred through fraud

We can help you prioritise these priority debts and manage them alongside any consolidation arrangement.

Advantages and disadvantages of Debt Consolidation

Advantages
  • Simplifies your finances with one monthly payment and one lender to deal with
  • Can potentially reduce your monthly repayments and overall interest if you secure a better rate
  • Fixed repayments make budgeting easier and more predictable
  • No formal insolvency — less impact on your credit file compared to IVA or bankruptcy
  • You remain in full control of repaying your debts
Disadvantages
  • You must qualify for the new loan (poor credit may mean higher rates or refusal)
  • The new loan could have a longer term, meaning you pay more interest overall
  • No debt write-off — you still repay the full amount borrowed
  • Risk of worsening your situation if you cannot keep up with the new payment
  • Secured consolidation options put assets (like your home) at risk if you default

Will Debt Consolidation affect my credit file?

Applying for a consolidation loan will involve a credit check, which may cause a short-term dip in your score. Once approved and old debts are cleared, making on-time payments can help improve your credit over time. Unlike formal solutions, debt consolidation itself does not appear as an insolvency marker on your file.

How long does Debt Consolidation last?

  • Loan term: Typically 1 to 7 years, depending on the amount borrowed and the rate you qualify for.
  • Repayment: You repay the full consolidated amount plus interest by the end of the term.
  • It usually provides a shorter, more structured path than a long-running Debt Management Plan, but the exact duration depends on what you can afford.

If your circumstances improve, you may be able to overpay and clear the loan faster.

Alternatives to Debt Consolidation

Debt consolidation is not always the best or most accessible option. Before proceeding, consider these alternatives:

  • Debt Management Plan (DMP) — Informal arrangement with reduced payments and possible interest freezes (no new loan needed)
  • Individual Voluntary Arrangement (IVA) — Legally binding plan with potential partial debt write-off
  • Protected Trust Deed (Scotland) — Similar to an IVA with fixed-term payments and write-off
  • Bankruptcy or Sequestration — Formal debt relief with faster discharge for those unable to repay

We will compare all options with you honestly and recommend the one that best fits your needs without pushing you into any solution.

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