Debt Consolidation

Debt consolidation is a technique offered by some lenders to help you pay off a number of outstanding debts by combining them into one monthly payment. In essence, the lender pays off all your existing debts, which may be to multiple lenders, leaving you with a single debt to the consolidating lender. If the interest they charge is less than the total of all the interest charged by your initial lenders, this can save you money, as well as only requiring you to liaise with one lender. Use our debt consolidation tool to see how this might apply to you:

Enter the details of your existing debts:

Name of DebtAmount OwedInterest APR % 
£ %

How to Interpret this Information

Once you have added all of your existing debts (excluding your mortgage, if you have one - this is normally better considered separate from other debts) to the list, choose a period over which you would like to pay them all off (the default is 24 months) and click on the "Calculate" button. The debt consolidation tool will work out the overall interest rate that you are being charged on all of your debts, and then work out how much it would cost to pay them all off over the period of time you chose (assuming each debt is paid off equally).

The important values are the overall interest rate, which is highlighted, and the total amount repayable. In theory, it would be possible to repay these debts over the same period for lower cost by repaying those with the highest interest rate first, and repaying those with the lowest interest rate last. However, since many debts like credit cards or card loans will have a minimum payment required each month, the calculator is not able to work this out.

How is this Helpful?

In theory, if you can find a debt consolidation loan over the same repayment period but with an APR lower than the overall rate displayed by the tool, you should be able to save money by switching to a debt consolidation loan. However, there are many potential problems with this, and the most significant is the phrase "same repayment period".

Although you might have chosen in the tool to try to repay your debts over 2 or 3 years, say, a typical debt consolidation loan might be offered to last 10 years or more, albeit with a lower interest rate. In this case, although the interest rate is lower and the monthly payments are also lower, you keep paying for a lot longer and the total amount repayable is significantly more. Compare any loan offers with the total figure the tool has calculated to see if there is a significant difference.

Also important to consider is whether any of your current lenders have early repayment charges which would apply if you were to pay them off with a debt consolidation loan. This could have a significant effect on the total cost of using debt consolidation, as might any fees charged by the consolidating lender for setting up the new loan. And beware of debt consolidation loans that are secured on your house - you might be moving from several unsecured loans to one secured loan - meaning that your house could be repossessed if you do not keep up repayments.

To learn more about loans, read this guide from Money Saving Expert.


The information and calculators / tools on this website are for illustrative purposes only. No guarantee is given or implied for the accuracy of information provided or of the calculations performed. Some lenders may charge additional fees for taking out loans or on completion of the loan term - these are not included in any of the LoanTutor tools.

Consult a qualified professional financial advisor before making any financial decisions.