Money Matters Team

Should You Consolidate Your Debt?

By Money Matters Team 05/01/2022

What to know about debt consolidation

Having multiple debts can be confusing – and it may even feel a little overwhelming at times. Different payment dates, different lenders, different amounts... it’s a lot to remember. But combining debt into one single payment can usually make it easier to manage – and may save you money. This is known as debt consolidation.

Getting started with consolidating debt can be a bit tricky and there are a number of things to consider. For example- how do you know if you should move your debt? Would debt consolidation affect your credit score? Does debt consolidation affect buying a home?

Read on for tips, advice and answers to the most common debt consolidation questions. It’s important to remember there are different ways you can consolidate your debt and you should take time to research the best option for your circumstances. In this article, we’ll be focusing on how loans and credit cards could help with debt consolidation.

1. Are personal loans good for debt consolidation?

Taking out an unsecured personal loan to consolidate your debt could be a good option to help you streamline payments. But only if you can afford to make regular monthly payments until the loan is paid off in full.

Whether a personal loan for debt consolidation is the right option for you will depend on your personal circumstances. The loan can be used to pay off different debts to help you get back on track with just one monthly payment.

If you already have a loan and are considering borrowing more from the same lender to consolidate debt, it’s likely your repayment term will be extended. Your interest rate may also change, so you might end up paying back more over time. That’s why it’s important to do your sums and figure out what works best for you.

2. Will debt consolidation affect my mortgage?

Your current mortgage won’t be affected by any actions you take to consolidate debt. However, missing payments could negatively impact your credit rating. And this could hinder future mortgage applications if you’re thinking about buying a new home.

Thinking about taking out a secured loan to consolidate your debt? Be careful, as this means you’ll be at risk of any unpaid debt being held against your property.

Lenders can offer a secured loan as an alternative for people who have a low credit score and who won’t be accepted for an unsecured loan. Secured loans use assets like property as security if you fail to make the repayments.

If you miss a repayment on a secured loan, the assets agreed could be at risk. So, if this is your property, ultimately your home could be at risk of being repossessed.

Before applying for a secured loan, it’s worth getting some debt advice. The Money Advice Service can help for free.

3. How to qualify for a debt consolidation loan

Most lenders have a list of requirements which you need to meet before your application for a loan is considered. And this is typically no different for a debt consolidation loan. You must:

  • Have a permanent UK address
  • Receive an annual income above a certain amount
  • Have a UK bank account
  • Be over a certain age, usually 18

It’s likely you’ll qualify for a debt consolidation loan if you have a good credit score. Why not use our loan calculator to see how much the repayments could be?

4. How does credit card debt consolidation work?

Juggling different credit cards with high interest rates soon makes monthly payments add up. So, consolidating debt onto one single card – with a longer balance transfer (or a low interest) period – can help you pay the debt faster.

You do this by carrying out a balance transfer, which moves outstanding debt on one credit card to another.

Once you’ve consolidated, you’ll need to pay at least the minimum payment each month otherwise you may lose the deal and pay the more expensive interest rate . But it’s worth paying a little more if you can afford it. Even better, aim to clear your debt before the interest-free period ends.

Some credit cards may even offer no fee on balance transfers, as well as long balance transfer periods.

5. Does debt consolidation affect credit score?

While debt consolidation itself won’t affect your credit score, missing loan and credit payments can. Once you consolidate debt, you’ll agree to repayment terms with your chosen lender which you must meet.

Applying for any type of credit – a loan or credit card, for example – can also affect your credit score. When you apply, it records a ‘hard search’ on your report which can lower your score temporarily. If you have a healthy credit score to begin with, it probably won’t cause much damage. You are most at risk if you have minimal credit history or a bad score. So, it might be worth checking your credit score if you’re thinking about consolidating debt.

Before you apply

It’s good to think about these key things before consolidating your debt:

  • Check whether any of your existing debt has early repayment charges
  • If applying for a loan to consolidate your debt, check whether it's secured or unsecured
  • Interest rates are usually lower the more you borrow. So, if you’re in a higher tier, you might want to consider borrowing a bit more in order to pay a lower rate of interest. But only do this if you are confident that you can afford it
  • If you’re keen to borrow more on an existing loan, check how your repayment period and interest rate might be affected

Still got debt consolidation questions?

Don’t worry, you can find out more about our debt consolidation loan options, or browse our loans support section. Interested in finding out more about credit cards? We’ve got a range of options including balance transfer and purchase cards.


This Money Matters post aims to be informative and engaging. Though it may include tips and information, it does not constitute advice and should not be used as a basis for any financial decisions. Sainsbury's Bank accepts no responsibility for the opinions and views of external contributors and the content of external websites included within this post. Some links may take you to another Sainsbury's Bank page. All information in this post was correct at date of publication.