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How to consolidate your loans

How to consolidate your loans

Secured Loans > Help & Advice > Getting and managing a loan > How to consolidate your loans

How to consolidate your loans

Loan consolidation is a form of debt consolidation. Debt consolidation is a process whereby multiple debts are combined into a single loan and repayment schedule which often has a lower interest rate. Debt consolidation can be achieved in different ways – like taking out a personal loan, transferring to a lower-interest credit card or using a home equity loan.

Why is managing your debt important?

No matter your financial situation, debt management strategies help you stay in control of your debt. The goal is to make the process of repayment simpler and potentially lower the amount you payback, with a view to eventually eliminating it.

Debt management strategies are important as they can reduce the amount of money that you pay in interest fees, which could help improve your financial situation more quickly.

What are the benefits of debt consolidation?

Simplified financial management

A consolidation loan makes it easier to see what you owe. If you have multiple credit cards, overdrafts and loans, it can be hard to know which to prioritise and what amount you need to pay each. For example, you might have several outstanding sums with different interest rates, so it can be hard to know what to pay and when.

With a debt consolidation loan, you just need to make one single monthly payment. This reduces the likelihood of missing a payment and gives you a clearer idea of how soon you can be debt-free.

Potential interest savings

Consolidating your debts into a loan or singular line of credit with a lower interest rate can lead to substantial savings over time. For example, if you have several credit cards with high interest rates, transferring those balances to a single lower-interest loan could reduce the amount of interest you pay. This frees up more of your income for other financial goals.

Better credit score

Having too many credit cards or loans can lead to high credit utilisation which can negatively impact your credit score. By consolidating your debts, you can lower your credit utilisation ratio, which helps improve your credit score.

It also reduces the likelihood of late or missed payments, which can positively impact your credit score.

More financial control

Debt consolidation can have a psychological benefit. Most people who consolidate their debts have a greater sense of control over their financial situation. With only one payment to focus on, you can reduce debt stress and focus on other aspects of financial planning – like saving.

What are the drawbacks of debt consolidation?

Higher interest rates

Although debt consolidation could reduce the amount of interest you pay, this isn’t always the case. You might be offered a loan rate that has higher interest charges than your current debts, especially if you have a bad credit score. If this is the case, you could be out of pocket.

Early repayment penalties

Under the Consumer Credit Act, lenders must allow you to repay a personal (unsecured) loan early in full. You also have the right to repay secured loans early in full. However, while you can always repay early, you might have to pay an early repayment charge (ERC) for your existing loan.

Higher monthly repayments

There’s the possibility that your monthly repayments could increase if you consolidate debts. This often happens if you’re repaying an overdraft because these only charge you for the interest on the overdraft, not the initial amount.

What types of debts are suitable for consolidation?

Not all debts are ideal for consolidation. Unsecured debts like credit card balances and personal loans are most consolidated. These debts typically carry higher interest rates, making them prime candidates for consolidation, which can offer more favourable terms.

How much debt do you need to consolidate?

There’s no hard and fast rule as to how much debt you need to consolidate.

It’s usually a good idea to consolidate your debts if your monthly repayments don’t exceed 50% of your monthly income. You should ensure you have enough cash to cover the monthly debt payments, although any lender will run an affordability check as part of the application process.

Who should consider debt consolidation?

If you’re financially stable but have multiple debts, you might be a good candidate for debt consolidation.

This approach can help you simplify your finances, particularly if you’re looking to optimise your budgeting process or take advantage of lower interest rates. It’s an excellent strategy if you want to maintain financial control, simplify your debt and avoid the risk of falling behind on payments.

How to best consolidate all debt

There are two main ways you can consolidate your debt:

Get a 0% balance transfer credit card: This will transfer your existing debt onto a credit card which has no interest for a set number of months. The time period depends on the card but it’s usually between 12-24 months. This can help you get rid of your debt faster as you don’t get stung with interest rates. You’ll need a good credit score to apply, though.

Get a debt consolidation loan: When you take out a debt consolidation loan, the money is used to clear your existing debts. Then, all you need to do is pay back the loan instalments over the pre-agreed period. While you can normally get a debt consolidation loan even with a bad credit score, you’ll often get a better rate if you have a better score.

Feature 0% APR credit cards Debt consolidation loan
Interest rate 0% APR for an introductory period (usually 6-18 months) Fixed or variable interest rate – our debt consolidation loans at Evolution Money come with variable interest rates
Fees Balance transfer fees (typically 3%-5% of the amount transferred) Origination fees (up to 10% of the loan amount) and lending fees may apply
Credit score requirement Good to excellent credit (typically 670+) is required for approval Accessible with a wider range of credit scores but better terms for higher scores
Loan/limit amount Credit limit based on credit score and income Loan amounts can range from a few thousand to £100,000, depending on creditworthiness and ability to make repayments
Repayment term Must pay off the balance within the introductory period to avoid high interest rates (typically 12-24 months) Fixed repayment terms, usually ranging from 2 to 7 years
Monthly payments Flexible, but minimum payments may not pay off the balance by the end of the 0% APR period Monthly payments over the loan term
Risk of higher interest rates Yes, after the introductory period, interest rates can be very high Depends on the product you take, you may be able to get a fixed rate for the term or a variable rate which can increase or decrease
Effect on credit score Can initially improve credit score if balances are paid off. High balances can negatively impact it Can improve credit score by reducing overall credit utilisation and establishing a consistent payment history
Time to pay off debt Depends on how aggressively you pay off the balance during the 0% period Typically, longer, but more structured due to fixed terms
Best for Short-term debt repayment, disciplined payers can avoid interest Consolidating multiple high-interest debts into one payment, a longer-term repayment strategy

How does it work if I want to consolidate my debt into one loan?

If you’re wondering how you can get a loan to consolidate your loan debt, here’s what you need to do.

  1. Step one: Look at your finances

    Before diving into debt consolidation, you need to look at your financial situation. List all your debts, including balances, interest rates and payment terms. This will give you a clear picture of what you owe and can help you determine the best consolidation strategy.

    You should also check your credit score as this directly impacts your options and the interest rates you’re offered.

  2. Step two: Review your budget

    Look at your monthly budget and figure out how much you can afford to repay each month. This step is essential to avoid overextending yourself financially.

  3. Step three: Research consolidation options

    Look at the different debt consolidation options available to you, weighing up the advantages and disadvantages of each method. If you need help, our expert financial advisors can help you weigh up your options.

  4. Step four: Compare and choose the best option

    Once you’ve explored your consolidation options, compare them to find the best fit for your situation. To do this, look at:

    ○ Interest rates and fees
    ○ Loan terms (including the repayment period and monthly amount)
    ○ Lender reputation

  5. Step five: Apply

    Once you’ve selected the best consolidation option, apply online. You’ll often need to provide proof of income, a list of debts and your credit score.

    If you’re approved, review the loan or credit card terms carefully before accepting. Make sure you understand the interest rate, repayment schedule and any fees involved.

    Once your application has been approved, your creditors will be paid directly to clear any existing debts in full. After this has been done, make sure you don’t accumulate new debts by sticking to a budget.

How long does it take to consolidate all debt in the UK?

How long it takes depends on the option you choose. Generally, 0% interest credit cards can take a few days, while debt consolidation loans take a few weeks. This is because you’ll need to apply for the loan, get approval and wait for the disbursement process to finish.

Is debt consolidation right for me?

Consider your long-term financial objectives and whether debt consolidation aligns with them. For instance, if your goal is to become debt-free within a specific timeframe, consolidation might be the right move.

Take control of your finances with Evo Money

At Evolution Money, we’ve helped thousands of individuals secure debt consolidation loans of up to £100,000 with repayment terms of between three to 20 years. If you think debt consolidation might be a good fit for you, we might be able to help you secure a debt consolidation loan. Check your eligibility without affecting your credit score or get in touch with our team.

For more financial guides, be sure to visit our help hub.

Warning: Late payment can cause you serious money problems. For help, go to moneyhelper.org.uk
Representative 23.06% APRC (Variable).

For a typical loan of £30,000.00 over 120 months with a variable interest rate of 19.56% per annum, your monthly repayments would be £598.34.

Including a Product Fee of £2,400.00 (8% of the loan amount) and a Lending Fee of £807.00, the total amount repayable is £71,800.20.

Annual Interest Rates ranging from 11.88% to 29.38% (variable). Maximum 50.00% APRC. The loan must be paid back by your 70th birthday. Read more.



Think carefully before securing debts against your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
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