Consolidating multiple debts into one

Can you consolidate all your debts into one loan?

Debt rarely comes in one neat form. A typical picture might include a couple of credit cards, a lingering overdraft, a store card and perhaps an existing personal loan, each with its own balance, interest rate and payment date. Consolidating multiple debts means borrowing enough to clear several of them at once and replacing them with a single loan, so you make one monthly repayment towards a known end date.

The appeal is obvious: fewer payments to track, a clearer sense of progress, and sometimes a lower overall interest rate. Combining a range of debts is also where it matters most to be selective. Not every debt belongs in a consolidation loan, and sweeping everything in without thought can cost more or, in some cases, put something important at risk. The pages on credit card debt and overdraft debt cover individual debt types; this page is about combining them sensibly.

Which debts are best suited to consolidation?

Consolidation generally works best for unsecured, higher-rate revolving credit and smaller fixed loans, the kind of everyday borrowing that becomes awkward to juggle. Debts that often suit being combined include:

• Credit cards, revolving, often higher-rate, with open-ended minimum payments.
• Store cards, usually among the higher rates and well suited to being replaced with structured borrowing.
• Arranged overdrafts, persistent balances that have no repayment structure of their own.
• Existing personal loans, though only where the numbers, including any early-settlement figure, stack up.

These share a common feature: they are unsecured, and replacing them with one fixed loan can simplify repayment and sometimes lower the rate. The debt repayment comparison calculator can help you compare keeping your current debts against a single loan.

Which debts should you leave out?

Some debts should usually stay outside a consolidation loan, either because of what securing them would involve or because they carry special consequences if they go unpaid.

Securing previously unsecured debts against your home is a particularly significant step. It can lower the monthly payment but puts your property at risk if you cannot keep up repayments. Weigh that carefully and read secured versus unsecured consolidation before considering it.

Why priority debts need separate handling

Some debts are classed as priority debts because not paying them has more serious consequences than missing, say, a card payment. These typically include council tax, rent or mortgage arrears, and arrears on essential utilities. Falling behind on them can lead to losing your home, court action or loss of a vital service, outcomes an ordinary consolidation loan does not prevent.

For that reason, priority debts should generally be dealt with on their own terms rather than folded into a consolidation loan. Lumping priority arrears in with card balances can mean paying interest on something that might otherwise be arranged directly with the creditor, and it can distract from the urgency these debts deserve. If priority debts are part of your picture, it is worth getting free advice before doing anything else.

Will consolidating multiple debts lower your monthly payments?

It often does, but a lower monthly payment and a lower total cost are not the same thing. A single loan spread over a longer term usually reduces what you pay each month, which can make a tight budget more manageable. Stretch the term far enough, though, and you can end up paying more in interest overall than you would have on your original debts, even if each month feels easier.

The figure to watch is the total amount repayable across the whole term, not the headline monthly payment. If the aim is breathing room in the budget, a lower payment can be worth a modest increase in total cost. If the aim is to clear the debt as cheaply as possible, keep the term as short as you can afford. Being clear about which of those you are after makes the decision far easier.

Build the full picture before you combine anything

Before combining anything, list every debt you have: the creditor, the balance, the interest rate, the monthly payment and, where relevant, any early-settlement figure. Mark which are priority debts and which are secured. Only once you can see the whole picture can you decide which debts genuinely belong in a consolidation loan and which are better left alone or handled another way.

This step also reveals the comparison that matters most: the total you would repay if you keep things as they are against the total on a single new loan. The debt consolidation calculator helps you total your balances, and the broader guidance on debt consolidation loans explains how to read a quote properly.

What to check before consolidating multiple debts

• Be selective. Include only the debts that genuinely benefit from being combined.
• Keep priority debts separate. Handle council tax, rent, mortgage and utility arrears on their own terms.
• Think hard about securing debt. Turning unsecured debt into secured debt puts your home at risk.
• Compare totals, not monthly payments. A lower payment over a longer term can cost more overall.

Frequently asked questions