Debt Consolidation: Pros and Cons

There are many solutions and debt management methods to help if you experience financial difficulties. One of which is through debt consolidation, which may help if you have multiple unsecured debts.

Debt ManagementThis type of loan allows you to merge all your fragmented monthly instalments from several lenders into one account. You only have to make one payment each month from one lender.

There are secured and unsecured plans available under this loan plan. The former requires you to provide collateral with the equity in your property. The latter does not require guarantees.

Applying for a debt consolidation loan

Consolidation loans can be applied for online. For example, has partnered with a leading broker to offer secured and unsecured loans. All you have to do is to complete the simple online loan application form. You will be later be asked to provide details about your income, expenditure and other existing loans.  There is no obligation and the service is free.


Any bonafide UK citizen can apply for debt consolidation, although lending criteria have been tightened after the credit crunch. Here are some conditions that you may need to meet lenders requirements:

  • UK bank account
  • Personal information: residing address, permanent address, employment status,
  • A mortgage on your home with evidence of equity in the property.  This is ascertained by a valuation survey undertaken during the application process.  This only applies to larger secured loans, and is not applicable to unsecured borrowing.
  • Credit history. Lenders will check your credit report and it is advisable to have as good a credit history as possible, particularly after the problems caused by the credit crunch.  If you have a poor history then you should probably seek debt management advice.


First of all, you get to control your debts as you are handling only one loan account. The way you keep track of your finances is also simplified, as this method is usually referred to as the “all-in-one solution”.

Secured debt consolidation loans can charge less interest than unsecured borrowing such as with credit and store cards.  You may well be able to save on your monthly interest payments, though you should clarify this with the broker arranging your loan.


Although there may be advantages in taking on a secured loan to consolidate your debts, you are placing your home at risk if you fail to meet your monthly repayments.  This is a serious point that must be considered carefully.

Also you have to be careful that you re not actually extending the period of your loans with longer terms.  For example if you have a loan with five years remaining it would actually cost you more in the long run, if you then consolidate that loan into a ten year term.

Lastly, this is not always available to everyone. Lenders often only offer debt consolidation loans to homeowners only, particularly for large loans.

Other options for debt solutions

Before taking out a  debt consolidation loan, you must weigh the advantages and disadvantages of this solution. Asking for debt help by consulting financial advisers is a wise decision. has partnered with 123 Debt Solutions who are qualified and experienced in providing a range of debt solutions.

Also, debt relief orders (DRO) may be more of assistance to you. Since April this year, this insolvency solution helps individuals who have no assets with minimal income but have significant debts. You can qualify for a DRO under these conditions:

  • debts amounting to less than ₤15,000
  • no more than ₤300 of gross assets
  • Less than ₤50 a month of disposable income
  • Resident of England or Wales
  • Not had DRO in the last 6 years and are not in any other form of insolvency solution like bankruptcy

Debt consolidation loans do help some people, particularly if the are “maxed out” with credit and store cards and are paying high interest rates for this unsecured borrowing.  As we have shown, though, there are disadvantages that have to be considered very carefully.

If you are experiencing financial difficulties then you should consider the range of debt help options that are available.  Seeking debt advice as soon as possible will help you find a solution before debts pile up and insolvency looms.

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