Consolidation means that you only make one payment a month towards your debts rather than several monthly payments, and that you only have one creditor to deal with.

Although it can seem that debt consolidation will make paying your debts easier, that’s not necessarily the case. For example, although a debt consolidation programme might allow you to organise your finances more easily, you might end up paying more back over the full term of the loan than you would have done with your original debts. This is as a result of consolidation loans often having higher interest rates or other less favourable terms.

When taking out a consolidation loan the temptation is not to pay all of your debt off and to use the money instead to pay for something else. This is dangerous, as you are both increasing your debt and the pressure on your monthly spending. When taking out a consolidation loan the best thing to do is to pay off all your debt, cancel all your cards and cancel all your agreements in writing.

Never be tempted to swap unsecured debts for a secured consolidation loan. This may reduce the interest rates charged, but if you fall behind with the payments you run the risk of losing your property.

Get free advice

We do not generally recommend debt consolidation. If you are having problems managing your debts, we can help you to find a better solution to your debt problem. Visit our online debt counselling service, CCCS Debt Remedy, for anonymous, impartial debt advice and an assessment of your financial situation.