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Whether you are a first time borrower or a returning customer, Loan Broker is always your trusted friend.

Here is some free professional advice to help secure and enhance your financial future.

Does Debt Consolidation Hurt Your Credit Score?

Debt can be a good thing. Debt gives you the chance to buy a home or a car and pay for it over a number of years. Debt starts and grows businesses. Debt allows you to extend your home if you have a growing family and you need more room.

Debt can be a bad thing too. Debt is bad if you find that, after all your monthly expenses have been paid, that most or all of your spare cash is swallowed up by debt repayments. It’s then when debt can cause frustration, worry, and anxiety.

Britons have never been in as much debt as they are today. Quite often, someone’s debt consists of three or four credit cards, a car loan, a personal loan. Each one of them has a different interest rate and repayments are often dotted across a month making managing money difficult.

If this is you, it may be worth considering a debt consolidation loan. But what are debt consolidation loans?

What are debt consolidation loans?

 Let’s say that someone has £15,000 in unsecured debts and they’re made up like this:

  • One credit card with £3,000 on it at an APR of 29%
  • Another credit card with £2,000 on it at an APR of 19%
  • A car loan of £4,000 with an APR of 13%
  • A personal loan of £2,000 with an APR of 19%

That’s five debt repayments each month with APRs varying between 9% and 29%.

What if you could take out a loan to pay off all of these and the loan carries an interest rate of 7%? This is what debt consolidation loans are designed to do. Depending on the length of time you take them out over, you could pay off your debt faster, only make one repayment a month, and that repayment will take less out of your bank account than the previous five repayments added together.

A debt consolidation loan can either be secured or unsecured. If it’s secured and you miss repayments, you could lose your home. However, secured payments offer, in general, lower interest rates than unsecured loans.

Do debt consolidation loans make financial sense?

 When you put it like this, yes they do. However, be aware that:

  • if you take out a debt consolidation loan over a very long time, the monthly repayments will be smaller but the amount you pay in interest will be higher
  • on secured loans, you may have to pay a set-up fee and a valuation fee
  • if you want to repay your loan early, you may be charged for it.

Always read the small print and ask to see all the charges you might have to pay plus the total cost of the loan.

How does debt consolidation affect my credit score?

 Taking out a debt consolidation loan may have both positive and negative effects on your credit score.

As with all other forms of debt, if you make your repayments on time, that works in your favour. If your debt consolidation loan means you pay off all your debt faster, that also has a positive effect.

Applying for a debt consolidation loan means that a hard search will be recorded on your credit report which may, in some cases, cause your score to dip. If you close your old credit card accounts too, this may have a negative effect on your score because of something called “credit utilisation”. This effect may last for up to a year.

Debt consolidation for people with poor credit

 Debt consolidation loans are available for people with poor credit however you can expect to pay a higher rate of interest if that describes your situation.

Do I need a guarantor?

 No. Guarantors are not required for bad credit debt consolidation loans.

Can I consolidate my debt if I have a low income?

 Yes but it’s a case then of finding a lender who is happy with that. It may be better to use a broker to find you a loan (more on that later).

Can I consolidate my debt with no credit check?

 No. Lenders will only offer you a debt consolidation loans after they have received your application details and carried out a hard credit check.

Are there any alternatives to debt consolidation?

 If you don’t want to take out a debt consolidation loan, there are a number of alternatives open to you.

 You could transfer your credit card balances to a 0% balance transfer card. Some interest-free periods on balance transfer cards last up to two-and-a-half years and offer significant savings potentials. You may be charged a transfer fee and, in many cases, if you miss a repayment, your interest free period will end and you’ll start paying interest on the full balance.

 If you’re finding repayments on certain loans or credit cards too difficult to meet, you should approach your lenders to see if they are able to reduce the amount you pay each month. Many lenders will be willing to do this however you will continue to accrue interest and you’ll end up paying more in interest over time.

 If you feel that the level of debt you’re in is overwhelming and you can’t manage anymore, it would be better for you to approach a debt charity for help rather than take out a debt consolidation loan. Debt charities are often happy to re you in discussions with your lenders although your lenders are under no obligation to accept any of their suggestions. Your debt charity may suggest that you either consider a debt management plan, an Individual Voluntary Arrangement, or, in the most extreme cases, bankruptcy.

Apply for a debt consolidation loan with Loan Broker

 Financial Conduct Authority-licenced broker Loan Broker helps customers across the UK find the right unsecured debt consolidation loan for them. We don’t lend you the money ourselves but we introduce you to the lenders who do – including for people with bad credit.

 Fill in our application form and we’ll get back to you within seconds showing you the very best deal we’ve found for you. You’re under no obligation to take any loan we offer you and our service is always free.

To start your search for an unsecured debt consolidation loan, please click here.

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Representative APR Example

The rate you are offered will depend on your individual circumstances.

All loans are subject to status. The interest rate offered will vary depending on our assessment of your financial circumstances and your chosen loan amount.

Representative APR Example: On an assumed loan amount of £2,600.00 over 36 months. Rate of interest 41% per annum (fixed). Representative 49.7% APR. Total amount payable £4,557.89 of which £1,957.89 is interest. 35 monthly repayments of £126.61 and a final payment of £126.54


Warning: Late repayment can cause you serious money problems. For more information, go to MONEYADVICESERVICE.ORG.UK
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Loan Broker ( is a credit broker and not a lender