What is debt consolidation?
Debt consolidation is a way to take out new credit to pay off your existing unsecured debts. It combines your current debts like loans and credit cards into one place.
Depending on the debt consolidation product, this can benefit you in several different ways. It can bring down your interest rate, reduce the time it takes to pay off your debts or streamline your debts so you can pay them off in one place.
If you’re struggling with unaffordable debt repayments, it can also reduce the monthly payment you make so it’s within your means. This could mean you end up paying more back overall though.
Debt consolidation could be a good option for you, depending on your situation. This is because it doesn’t have a negative effect on your credit rating, unlike some other debt solutions. After you’d paid off the debt consolidation loan, you wouldn’t have any additional damage on your credit history.
But debt consolidation can mean extra fees and charges, so you could end with more to pay back. And if you’re really struggling with your debts, taking on extra credit might make your situation worse.
If you’ve had a lot of problems repaying credit in the past, like missed payments, you might find it difficult to get accepted for debt consolidation. We’ll take you through more about this on our ‘How do I qualify for debt consolidation?’ page.
Depending on your individual circumstances, debt consolidation might not necessarily be the best way for you to clear what you owe. You can read about this in more detail in the ‘Is debt consolidation right for me?’ section.
Still got more questions about debt consolidation? We’ll take you through some of the most common in our ‘Debt consolidation FAQs’.
Now we’ve explained what debt consolidation is and how it could help you repay your debts, read on to find out more about it on our ‘How does debt consolidation work? page’.Continue to the next section How does debt consolidation work?