Can I get a consolidation loan to deal with my debts?

October 1, 2017

A consolidation loan allows you to combine a number of loans, overdrafts, store cards or credit card debt into one monthly repayment, rather than making individual payments to multiple creditors. As such, it can be very beneficial when trying to budget or improve your cash flow.

Debt consolidation loans help you pay off debt, but there are downsides, one of which is the total amount of interest that you’ll pay overall. So what are the main considerations when thinking about consolidating debt into one payment?

  • Obtaining professional advice to ensure debt consolidation is your best option
  • Only approaching reputable loan providers
  • Shopping around for the best deals
  • The term of the loan
  • Early repayment charges
  • Whether the interest rate could change and affect your ability to repay

Can you have a consolidation loan for secured and unsecured debt?

Personal loans, overdrafts, credit cards and store cards are all unsecured debts. When you take out an unsecured debt consolidation loan, you may be able to include all of these existing debts within the new arrangement.

Some lenders will require you to take out secured debt consolidation, however, which can place your home at risk of repossession should you be unable to repay at any point. Secured consolidation loans represent a much greater risk to you financially, but may be your only option if you have poor credit.

Debt consolidation loans for bad credit

If you have a poor credit record, you may be wondering if you’re still eligible to consolidate your debts. In this case, lenders could specify that a guarantor must be in place to take over the repayments if you default.

Loan guarantors are often parents, or an immediate family member, who is willing to pay on your behalf should you fail to make a repayment. If you don’t have a guarantor, a secured consolidation loan may be your only other option.

Unsecured consolidation loans generally attract a higher interest rate due to the increased risk of default borne by the lender. In contrast, a secured loan represents less risk to the lender – they’re able to recover their money via the asset on which the loan is secured.

What are some of the advantages and disadvantages of debt consolidation?


  • Lower monthly repayments
  • A fixed end date for paying off debt
  • One monthly payment each month
  • Only one creditor


  • You could pay more interest over the term of a consolidation loan
  • The loan will be over a longer period of time
  • If you have a low credit score, you may only gain access to loans with a high interest rate
  • If you get into further debt, it might be difficult to keep up repayments on the consolidation loan

It’s a good idea to close down the credit card or store card accounts included within a debt consolidation loan, or cancel the overdraft facility. Coping with additional repayments such as these will compromise your ability to pay off the old debt, should you be tempted to use the cards or overdraft again.

For more advice on debt consolidation, call our professional team at Northern Ireland Debt Solutions. We’ll ensure you understand the pros and cons of taking out a consolidation loan, and can arrange a same-day appointment free-of-charge.

Lawrence O'Hara

Insolvency Adviser

Tel: 028 2132 6269

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