UK Loans
Debt Consolidation Loans in the UK: What to Know Before You Combine Your Debts
Consolidation lowers the monthly payment. Whether it lowers the total depends on the term and the fee.
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- What it does
- One loan replaces several debts
- Typical term
- 3-7 years
- Main risk
- Longer term, more total interest
- Check first
- Whether total repayable actually falls
The payment falls, the total may rise
Spreading 12,000 pounds over seven years at 12% gives a comfortable payment and roughly 5,000 pounds of interest. Over three years it is half that.
Fees and term together decide it
A 3% arrangement fee on 12,000 pounds is 360. Add a long term and the cheaper consolidation can cost more than the debts it replaced.
Close the cleared accounts
Consolidation fails when the freed-up credit is reused. Close the cards or cut the limits, at least until the loan is half repaid.
Check free alternatives first
StepChange and Citizens Advice offer free DMPs and breathing space. A DMP does not borrow more money and often costs less overall.
FAQ
Is consolidation better than a DMP?▾
Only if you can qualify for a rate below your debts and will stop borrowing.
Does it hurt my credit file?▾
A search and a new account; utilisation falls.
Can I consolidate a mortgage?▾
Yes, but you extend the term over the property.
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