Loans for Debt Consolidation

Cara Bradley

Written by

Cara Bradley

5 min read

Updated: 23/02/2024


If you’re looking to streamline your finances, a debt consolidation loan could be an option to consider.
It’s important to consider whether the Annual Percentage Rate (APR) of any loan you are matched with is less than the combined interest of your existing debt. If it is lower, a debt consolidation loan could help to make your debt repayments more manageable.
If you need advice on debt or money management, please visit StepChange.org.

https://res.cloudinary.com/dpgvsuzw8/image/upload/v1708689407/Debt_Consolidation_Loans_q1twpm.jpg

How do debt consolidation loans work?

  • Add up the total amount of money you owe; this could include any loans or credit cards
  • You now have a clear idea of how much money you need to consolidate your borrowing. You should not apply for more money than you need or can afford to repay.
  • Use the loan to clear your debts. You should be left with just one repayment to make each month.
  • Pay back the new loan in monthly instalments.

When searching for a debt consolidation loan, you should also pay particular attention to interest rates. Work out how much interest you’re currently paying across all your debts, and search for a debt consolidation loan with a lower rate of interest.
Having only one repayment to make each month may make it easier to keep on top of your finances.

What can I use a debt consolidation loan for?

You can use a debt consolidation loan to pay off your existing debt(s).
This could include:

  • Personal loans.
  • Payday loans.
  • Credit cards.

Things to be aware of before taking out a debt consolidation loan

  • It’s important to consider whether the Representative APR of any loan you are matched with is less than the combined interest of your existing debt. If it is lower, a debt consolidation loan could help to make your debt repayments more manageable.
    If you need advice on debt or money management, please visit StepChange.org
  • It’s important to be aware of all your options before applying for a debt consolidation loan. Be aware that you’re taking on further debt, and this may not necessarily be the best option for your circumstances. You may want to do some further research into debt consolidation alternatives on sites such as National Debtline and Citizens Advice.
  • Defaulting on your debt consolidation loan repayments could result in late fees, additional charges, and a decline to your credit score.
  • Check to see if you will be charged an early repayment fee on any existing loan(s) before you use your debt consolidation loan to pay off the balance.

Will a debt consolidation loan affect my credit score?

Like all credit products, applying for a loan will impact your credit score. The effect this has depends on how well you manage your borrowing.
For example, if you make all your repayments on time and clear the balance of your loan within the set term, you could notice an increase in your credit score over time.
On the other hand, falling behind on or failing to make your repayments will harm your credit score.

Can I get a debt consolidation loan with bad credit?

If you decide to apply for a loan with bad credit, it’s important to remember that your options could be limited., You may be offered a higher interest rate, and you might not be able to borrow as much money as you need. Bear this in mind when thinking about applying for a debt consolidation loan – the last thing you want is to end up in a worse financial position.

Viva Money is a credit broker, and we work with a panel of trusted lenders authorised and registered with the Financial Conduct Authority (FCA). Some of the lenders on our panel specialise in providing loans for those with less-than-perfect credit scores.

Will improving my credit score increase my chance of being approved for a loan?

A good credit score could mean you have a better chance of being approved for a loan.
You can work towards building your credit score by registering to vote, amending any errors on your credit report, and paying your bills on time. If you have a current credit card, be sure to stay within your credit limit, and make at least the minimum repayment amount each month.

Can I search for a debt consolidation loan with Viva Money?

You’re welcome to search for a debt consolidation loan with Viva Money if you:

  • Are over the age of 18;
  • Are a UK resident with a UK address;
  • Have a UK bank account with a valid debit card; and
  • Have a regular income paid directly into your bank account.

How long will I have to pay off my debt consolidation loan?

When you make your initial application for a debt consolidation loan, you can choose the amount of time that you’d like to borrow the money for. This is known as the loan ‘term.’
Loan terms vary between providers and are subject to how much money you apply to borrow.

The lenders on the Viva Money panel provide debt consolidation loans between £100 and £10,000. Depending on the amount of money you apply to borrow, you could choose a repayment term from 3 to 60 months.

I’m struggling to keep up with the repayments on my loan. What can I do?

Money worries can feel really isolating, but please remember that you’re not alone.
Talking about money can feel daunting, but reaching out and asking for help is the first step towards getting back in control.

If you’ve taken out a loan that you’re having difficulty repaying, you should contact your lender as soon as possible.

I’m worried about money - can you help?

You can find free, impartial advice on websites such as National Debtline, Citizens Advice, and MoneyHelper.

Viva Money have teamed up with charity StepChange to provide a Money Health Check quiz. The quiz can be taken online for free with no impact to your credit score. The answers you provide will remain confidential and will generate general advice on what to do next.