Compare debt consolidation options
Consolidation is not a single product, and a loan is not always the best route. This page compares the main options side by side so you can see how they differ on cost, risk and who they tend to suit.
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The main ways to consolidate debt at a glance
When people talk about "consolidating" debt, they can mean several different things. Some involve new borrowing; others simply reorganise what you already owe. The right choice depends on how much you owe, your credit history, whether you own a home, and how comfortably you can afford the repayments. The table below sets the main options next to each other.
| Option | What it is | Who it may suit | Key risk or consideration |
|---|---|---|---|
| Unsecured loan | A personal loan not tied to any asset, used to clear existing debts. | People with a reasonable credit profile wanting a fixed term and no asset at risk. | Rate depends on credit; amounts usually smaller than secured loans. |
| Secured loan | Borrowing secured against your property. | Homeowners seeking a larger amount, who understand the risk. | Your home may be repossessed if you do not keep up repayments. |
| Balance transfer card | Moving card balances to a card with a 0% introductory period. | People with mainly credit-card debt who can repay within the offer. | Fees apply; the rate jumps after the promotion ends. |
| Debt management plan | An informal arrangement to repay debts at an affordable rate, often via a charity. | People struggling to meet current payments. | Not new borrowing; may affect your credit file and take longer. |
| Overpay existing debts | Keeping your debts but directing spare money at the most expensive first. | People who can afford a little extra and want to avoid new borrowing. | Requires discipline; no single payment, but often the cheapest route. |
Which option tends to suit which situation?
The table gives the shape of each choice. The notes below add the detail that decides between them.
Unsecured loans
An unsecured consolidation loan puts your debts into one fixed-term loan without tying anything to your home. It tends to suit people with a reasonable credit record who want a clear end date and no asset on the line. The rate you are offered rests mainly on your credit profile, and the sums available are generally smaller than with secured borrowing.
Secured loans
A secured consolidation loan is tied to your property, which can open the door to a larger amount or a lower rate. The trade-off is serious: if you fall behind, your home may be repossessed. Turning unsecured debt into debt secured on your house is a big step and one to weigh carefully, ideally with independent advice.
Balance transfer cards
If your debt is mostly on credit cards, a balance transfer card with a 0% introductory period can pause interest while you clear the balance. A transfer fee usually applies, and the rate climbs once the offer ends, so it works best for people who can repay within the promotional window.
Debt management plans
A debt management plan is not borrowing at all. It is an informal arrangement, often arranged free by a charity, to repay your debts at a rate you can afford. It can be the right answer when payments are already unmanageable, though it may show on your credit file and take longer to clear.
Overpaying what you already owe
Keeping your current debts and paying a little extra each month, starting with the most expensive, avoids new borrowing entirely. It asks for discipline and does not give you a single payment, but it is frequently the cheapest way to become debt-free.
How do you compare debt options fairly?
Whichever options you weigh, compare them on the same basis. The monthly payment alone can mislead, because a lower payment achieved by stretching the term usually costs more in total. Look at the total amount repayable, the interest rate (APR), any fees, and how flexible the arrangement is if your circumstances change. The debt comparison calculator puts your current repayments next to a single loan so you can see both figures together rather than guessing.
When is taking on new borrowing not the answer?
If the core problem is that you owe more than you can realistically repay, another loan can make things harder rather than easier. In that situation, free debt advice is likely to be more useful than any product. A debt adviser can look at your whole position and explain options, including debt management plans and formal solutions, that a lender cannot offer.
Free, impartial help is available from MoneyHelper, StepChange and Citizens Advice.
Common questions about consolidation options
Is a loan or a balance transfer cheaper for credit-card debt?
It depends on the rates, the fees and how quickly you can repay. A 0% balance transfer can be cheaper if you clear the balance before the offer ends; a loan gives a fixed term and a steady payment. Compare the total cost of each.
Does a debt management plan hurt my credit score?
It can. Reduced payments under a plan are usually noted on your credit file and may stay for several years. For many people in difficulty, though, a sustainable arrangement matters more than a short-term dip in score.
Can I switch between options later?
Often, yes, though it is not always free or straightforward. You might move card balances again, overpay a loan, or seek advice about a plan. Each change has its own costs and effects, so weigh them before acting.
Which option is best if I own my home?
Owning a home opens up secured borrowing, but that is not automatically the right choice. A secured loan risks your property, so compare it honestly against unsecured options and non-borrowing routes first.
Do I need to tell my current lenders I am consolidating?
When you repay a debt in full, that creditor is settled and the account can be closed. You do not need their permission to consolidate, but always ask for a settlement figure so the balance is cleared exactly.