17 Jul 2024

How to consolidate debt

Over the years, it’s easy to build up a bit of debt. If you’ve been doing that, you’re not alone. The average UK household has:

  • £65,143 of debt (including mortgages)
  • £2,471 of credit card debt
  • £2,710 of annual interest payments

And we don’t always feel on top of our debts. Citizens Advice deal with nearly 1,200 debt issues every single day.

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Looking after your financial wellbeing is really important. Our tools and resources can help you understand your money better.

Of course, you don’t need a financial expert to tell you that the ideal solution to debt is… paying it off! But that’s not always easy to do.

So in this article we’re going to look at another way of managing it:

  • taking out a loan to consolidate debt.

We’ll explain what consolidation of debts is and chat you through how to take out a loan to consolidate debt.

What is debt consolidation?

You consolidate debt by bringing all your debts together in one place. It can include pretty much any kind of debt, including:

  • credit cards
  • store cards
  • overdrafts
  • personal loans.

What is a debt consolidation loan?

A loan for debt consolidation is a single loan that you take out to bring lots of different loans or debts together. When you set it up you’ll agree to a structured repayment plan and single interest rate for it. That means you’ll always know:

  • exactly how much you’ll repay each month
  • exactly when you’ll clear the loan.

 There are two types of debt consolidation loan:

  • Secured loans, which are secured against an asset that’s worth as much as or more than the loan. Usually that’s your home.
  • Unsecured loans, where at most the lender will check your income and outgoings to make sure you can afford your repayments.

How does debt consolidation work?

Debt consolidation works by bringing all your debts together, making them easier and hopefully cheaper to manage.

Is it a good idea to consolidate your debt?


  • You have just one monthly repayment to manage, rather than lots of different ones on different dates with different deadlines.
  • You might be able to cut down the interest you’re paying, helping you cut down your outgoings, pay your loans off more quickly or even both at once.
  • With some types of loan, like a lifetime mortgage, you don’t have to make any payments at all. See our section on “Equity release for debt consolidation” below for more info.
  • Although taking out a new loan could lower your credit score, in the long run it should improve if you keep up your repayments and don’t take on any more debts.


  • You’re reorganising your debts not paying them off, so although life is hopefully simpler and cheaper you’re still not debt free.
  • You might have to cover set up and running costs, like balance transfer fees, early redemption charges for any other loans and ongoing annual fees. Keep an eye out for them!
  • You might still end up paying more interest – for example, if you get a lower rate but you’re making payments for longer. So always look at repayment time as well as interest rates.
  • Providers advertise lots of impressive rates. But you might not qualify for them. So don’t base your planning on the ads. Get quotes before you make a choice.

Equity release for debt consolidation

Equity release could be a good way of consolidating debts if you:

  • Own your home, or are in the process of buying it
  • Are happy to secure the loan against it
  • Are aged at least 50 or older

Debt consolidation using home equity works a bit like a standard mortgage, releasing cash from the value of your property.


There are two types of equity release:

Their main plus points of a lifetime mortgage are:

  • For certain types, your lender will base their decision on your property’s value, not your income or credit score
  • Your loan’s paid back when you die or go into long-term care
  • You can choose to make some, all or no monthly interest repayments

But if you’re going for equity release debt consolidation, don’t forget that:

  • You’ll have to pay upfront fees to take out an equity release loan – and you can only get one through a qualified financial adviser
  • If you don’t make monthly interest payments, they’ll be added to your loan and can build up quickly over time so there may be cheaper ways to borrow money
  • Any money you get from equity release might impact any means-tested benefits you’re getting and can reduce the amount of inheritance you leave behind

You can find out more on our equity release page.

How much money could you release?

If equity release sounds like it could be an option for you, use our equity release calculator to see how much money could be tied up in your home.

What’s next?

If you’ve been asking “Can you get a loan to consolidate debt?” we hope you now know that the answer is very much “Yes, you can”. So if debt consolidation is for you, the next step is to work out how you’re going to do it. We’d suggest: 

  • Visiting the MoneyHelper or Citizen’s Advice debt pages – they both offer excellent help and support
  • Checking out our debt consolidation-related content, like our Managing your money and Inflation articles, and our Financial safety net tool
  • Listening to our Cost of living podcast episode – it covers debt consolidation and has lots of other money-saving tips too
  • If you’re over 50 and interested in equity release, using our Equity release calculator and taking a look at our other equity release content
  • Do a little financial planning with our budget planner to check your outgoings against your income and make sure you don’t end up with more debts in the future
  • Double checking that, if you have small, manageable debts, it’s not cheaper to just create and follow your own repayment plan instead of taking out a whole new loan
  • If you have debts secured against your home and are considering equity release, think carefully before securing another debt 

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