Repaying debt can be expensive and stressful, particularly if you have multiple repayments that you need to manage. It could be that you have to keep track of different interest rates, make sure payments are made on different days of the month, and juggle both credit card and loan debt. One solution could be a loan for debt consolidation. This could simplify your repayment schedule and help you swap an expensive debt for a cheaper one. In this article you can find the best personal loans for debt consolidation in the UK, all of the crucial information you should know about how they work and the way to find the best possible deal.
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What is a personal loan for debt consolidation?
A debt consolidation loan is designed to help you pay off multiple debts, leaving you with fewer bills and lower monthly repayments. For example, you could take out a new loan for £10,000 in order to pay off four different £2,500 debts. The money from the new loan goes to paying off the existing debt, then you repay the debt consolidation loan. This will reduce the overall cost of your debt if your new loan charges a lower rate of interest than your combined existing debt. It should also simplify the process of paying the money back.
Managing more than one monthly repayment can be challenging and may lead to missed payments. By consolidating your debt, you could ease some of the administrative strain of paying back what you owe, especially if the debts you are consolidating are from different forms of borrowing, charging different rates or with repayments due on different days.
How to find the best loan for you
Money to the Masses has partnered with Creditec* to help track down the best loan for you. By entering a few basic details, if you are eligible, you can see a tailored list of loans that suit your individual circumstances. You can then sort these results by the criteria that is most important to you, such as loan amount or interest rate. Your results will include how likely you are to be accepted for each loan, which means you can apply with more confidence. To get these results, your details will be used to conduct a soft credit search, which will not affect your credit score. Click on this link to get started*. If you are not eligible for a loan with any of the providers on the panel then you may be shown a variety of alternative products that may be suitable for you. You are under no obligation to continue with them if you feel they are not suitable for your circumstances.
The best loans for consolidation
We have used the representative examples of repaying a £1,000 loan over three years, a £5,000 loan repaid over five years, a £10,000 loan repaid over five years, a £20,000 loan repaid over five years and finally a £25,000 loan repaid over five years to source the figures in this table. It is important to remember that the loan amount and rate you are ultimately offered will be based on your credit history and financial circumstances, so the APR you receive may differ to the representative APR you see in the tables below.
Keep in mind that if you choose to repay your debt consolidation loan over a longer period than your existing debt, the monthly repayments will be more affordable, but adding to your loan period could make the debt more expensive overall. This is because the sooner you pay the money back, the less time there is for interest charges to compound and build up.
If you need to learn more about loans for debt consolidation before you compare the best deals, head over to our 'Using a personal loan for debt consolidation' page.
Best loans for consolidation – September 2024
The best rates on a £1,000 loan
| Loan provider | Representative APR (from) | Available loan term | Available loan amount | Monthly payment | Eligibility checker? |
| Santander | 13.5% | 1 - 5 years | £1,000 - £25,000 | £33.56 | No |
| M&S Bank | 14.9% | 1 - 7 years | £1,000 - £25,000 | £34.16 | Yes |
| AIB (NI)¹ | 16.4% | 1 - 5 years | £1,000 - £25,000 | £35.01 | No |
| HSBC | 16.9% | 1 - 5 years | £1,000 - £25,000 | £35.02 | No |
| Zopa | 22.9% | 1 - 5 years | £1,000 - £25,000 | £37.57 | Yes |
| TSB | 27.9% | 1 - 7 years | £300 - £50,000 | £39.69 | No |
| Halifax | 29.7% | 1 - 7 years | £1,000 - £50,000 | £40.44 | Yes |
Representative APR is based on a 3-year loan term
¹You must be an existing personal current account customer with AIB (NI) and registered for Online Services
The best rates on a £5,000 loan
| Loan provider | Representative APR (from) | Available loan term | Available loan amount | Monthly payment | Eligibility checker? |
| Tesco Bank | 7.2%¹ | 1 - 10 years | £1,000 - £35,000 | £98.94 | Yes |
| Santander | 7.2% | 1 - 5 years | £1,000 - £25,000 | £98.94 | No |
| AIB (NI)² | 7.9% | 1 - 5 years | £1,000 - £25,000 | £100.83 | No |
| HSBC | 9.9% | 1 - 5 years | £1,000 - £25,000 | £104.95 | No |
| M&S Bank | 9.9% | 1 - 7 years | £1,000 - £25,000 | £104.95 | Yes |
| TSB | 13.9% | 1 - 7 years | £300 - £50,000 | £113.99 | No |
| Halifax | 17.9% | 1 - 7 years | £1,000 - £50,000 | £123.14 | Yes |
| Zopa | 22.9% | 1 - 5 years | £1,000 - £25,000 | £187.68 | Yes |
Representative APR is based on a 5-year loan term
¹Clubcard members receive a preferential rate, non-members will get from 7.9% and pay £100.49 a month
²You must be an existing personal current account customer with AIB (NI) and registered for Online Services
The best rates on a £10,000 loan
| Loan provider | Representative APR (from) | Available loan term | Available loan amount | Monthly payment | Eligibility checker? |
| Tesco Bank | 6.1%¹ | 1 - 10 years | £1,000 - £35,000 | £193.02 | Yes |
| TSB | 6.2% | 1 - 7 years | £300 - £50,000 | £193.47 | No |
| Santander | 6.2% | 1 - 5 years | £1,000 - £25,000 | £193.47 | No |
| M&S Bank | 6.2% | 1 - 7 years | £1,000 - £25,000 | £193.47 | Yes |
| Halifax | 6.6% | 1 - 7 years | £1,000 - £50,000 | £195.23 | Yes |
| HSBC | 6.6% | 1 - 5 years | £1,000 - £25,000 | £195.23 | No |
| AIB (NI)² | 7.1% | 1 - 5 years | £1,000 - £25,000 | £197.85 | No |
| Zopa | 22.9% | 1 - 5 years | £1,000 - £25,000 | £269.40 | Yes |
Representative APR is based on a 5-year loan term
¹Clubcard members receive a preferential rate, non-members will get from 6.5% with monthly repayments from £194.79
²You must be an existing personal current account customer with AIB (NI) and registered for Online Services
The best rates on a £20,000 loan
| Loan provider | Representative APR (five-year term) | Available loan term | Available loan amount | Monthly payment | Eligibility checker? |
| Tesco Bank | 6.1%¹ | 1 - 10 years | £1,000 - £35,000 | £386.05 | Yes |
| TSB | 6.2% | 1 - 7 years | £300 - £50,000 | £386.94 | No |
| M&S Bank | 6.2% | 1 - 7 years | £1,000 - £25,000 | £386.93 | Yes |
| Santander | 6.4% | 1 - 5 years | £1,000 - £25,000 | £388.70 | No |
| Halifax | 6.6% | 1 - 7 years | £1,000 - £50,000 | £390.47 | Yes |
| AIB (NI)² | 7.1% | 1 - 5 years | £1,000 - £25,000 | £395.69 | No |
| HSBC | 7.4% | 1 - 5 years | £1,000 - £25,000 | £397.54 | No |
| Zopa | 22.9% | 1 - 5 years | £1,000 - £25,000 | £538.80 | Yes |
Representative APR is based on a 5-year loan term
¹Clubcard members receive a preferential rate, non-members will get from 6.5% with monthly payments from £389.58
²You must be an existing personal current account customer with AIB (NI) and registered for Online Services
The best rates on a £25,000 loan
| Loan provider | Representative APR (five-year term) | Available loan term | Available loan amount | Monthly payment | Eligibility checker? |
| Tesco Bank | 6.1%¹ | 1 - 10 years | £1,000 - £35,000 | £482.57 | Yes |
| TSB | 6.2% | 1 - 7 years | £300 - £50,000 | £483.67 | No |
| Santander | 6.4% | 1 - 5 years | £1,000 - £25,000 | £485.88 | No |
| M&S Bank | 6.9% | 1 - 7 years | £1,000 - £25,000 | £491.40 | Yes |
| Halifax | 6.6% | 1 - 7 years | £1,000 - £50,000 | £488.08 | Yes |
| AIB (NI)² | 7.1% | 1 - 5 years | £1,000 - £25,000 | £494.61 | No |
| HSBC | 7.4% | 1 - 5 years | £1,000 - £25,000 | £496.92 | No |
| Zopa | 22.9% | 1 - 5 years | £1,000 - £25,000 | £673.50 | Yes |
Representative APR is based on a 5-year loan term
¹Clubcard members receive a preferential rate, non-members will get from 6.5% with monthly payments from £486.97
²You must be an existing personal current account customer with AIB (NI) and registered for Online Services
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We’ve teamed up with Creditec
- Check your eligibility for a loan before you apply
- No effect to your credit score
- Representative 26.9% APR
- Simple to use
Consolidation loans for bad credit
Whether you have a good credit score or bad credit score is a key indicator of how much you will be able to borrow and at what rate. Having bad credit will not necessarily block you from getting a consolidation loan, but it can make it harder to get a good deal.
The interest rates you can see on this page are the representative APR of the loans, which is what the lender expects at least 51% of successful applicants to be offered. If you have bad credit, you are unlikely to be in this group and should expect to be offered a higher figure. In fact, you may be rejected entirely or offered a lower loan amount.
It is easy to check your current credit score for free and there are easy changes you can make to turn things around if you do have bad credit. However, it can take some time, so you make need to also consider the borrowing options in our article 'How to borrow money with bad credit'.
The key figures in loans for consolidation
Here are the key figures to pay attention to when you compare loans for home improvements:
- APR (annual percentage rate) - Cost of borrowing the money in the first year, including the interest you are being charged and any standard fees charged by the lender.
- Representative APR - What the lender expects at least 51% of successful applicants to be offered. You may get a different rate, but it is a useful way to compare providers early on.
- Loan amount - The amount of money you are borrowing. Some people may be able to borrow much more than the most common £1,000 to £25,000 range, while others may get less.
- Loan term - How long you are borrowing the money for. Most lenders on this page offer between one and seven years, but longer terms may be available.
- Loan fees - What you will be charged in addition to what you have borrowed. Fees will vary between lenders, so it is important to check before you apply.
- Early repayment charge - An extra charge some lenders add on if you try to repay your loan in full before the end of the term.
- Credit score - A rating of how reliable or trustworthy a borrower you are, based on your credit history.
How personal loans for debt consolidation work
Getting a debt consolidation loan follows a similar process to other kinds of personal loan. Here are the steps:
- Work out what you owe - Calculate your total existing debt. This means everything across credit cards, loans and overdrafts.
- List your rates - Note down each debt separately ordered by what interest rate you are paying. This will help you prioritise your most expensive debt.
- Compare loans for consolidation - See what rates are available and how much you can borrow, making sure to check your eligibility without completing a full application.
- Decide how much to borrow - You will want to borrow enough money to pay off the debts that are more expensive than your new consolidation loan, but not anything that is cheaper, such as a 0% credit card.
- Apply for a debt consolidation loan - Most loans allow you to apply online, while some applications can be made over the phone or in person. The lender will run a credit check and affordability test to measure how likely you are to repay what you are borrowing. Keep in mind that a longer loan term will mean spending more on interest, even if the monthly repayments go down.
- Pay off your debt - Once the money from your debt consolidation loan has been paid to you, you can pay off your existing debts. Prioritise the lenders that charge the highest rate of interest.
- Pay off the debt consolidation loan - It should be much easier to manage your debt with fewer repayments. You will know how many months it will take to clear and exactly what you owe to become debt free.
How much can I borrow with a consolidation loan?
How much anyone can borrow with a consolidation loan is determined by their financial circumstances and credit history. This shows a lender how much someone can afford to repay and to what extent their borrowing history suggests they can be trusted to repay the money.
Many mainstream lenders cap personal loans at £25,000 or £50,000, but some specialist lenders may go higher. If you need more than £50,000 to consolidate your debt, you may find that a secured loan or remortgaging are better options. However, while you may be able to borrow more money and spread your repayments over a longer period, your home will be at risk. The nature of secured debt is that the asset you put up could be sold to settle what you owe if you are unable to repay.
Keep in mind that loans for consolidation only work efficiently when used to pay off more expensive debt. For example, if you are repaying three loans at 5%, 10% and 20%, a 7% debt consolidation loan would be useful to consolidate the latter two, but not the first one. This means that you should only borrow enough money to cover the debts that are more expensive than the new loan.
What can loans for consolidation be used for?
Loans for consolidation are used to clear other debts. This could be other personal loan debt, overdrafts, credit card debt or even store card debt. It is important to make sure the debt you are paying off with your consolidation loan is more expensive than the consolidation loan itself, otherwise you will end up paying more money overall.
You could use your debt consolidation loan to pay off one particularly expensive debt, more than one debt or a range of different types of debt. For example, if you have expensive personal loan debt, a high-interest credit card and an overdraft, you could use your debt consolidation loan to pay off one, two or all three.
Personal loans are more flexible than a credit card or other forms of borrowing, so you can still change your mind on how to use the cash once the money is in your account. So long as you stick to your lender's rules – not using the loan for gambling, business purposes, illegal activity or buying property – you can put the money towards whatever expense you choose to prioritise.
Pros and cons of loans for consolidation
Here are the main advantages and disadvantages of taking out a debt consolidation loan:
Pros of loans for consolidation
- Lower monthly payments - Consolidating your existing debt could reduce how much you pay each month, either through a longer term or a lower rate.
- Cheaper in the long run - Getting a lower interest rate than you are paying on your existing debt will mean you pay less overall if the term remains the same.
- Simplified repayments - One repayment is much easier to keep track of than managing multiple repayments every month.
- Protect your credit score - Having to make multiple repayments each month can make it more likely that you will forget to make one. Missed payments could damage your credit score and make future borrowing more difficult.
- Higher borrowing limits - The upper borrowing limit on a loan is likely to be high compared to a credit card, so it can be a more effective consolidation tool for people with a lot of debt.
Cons of loans for consolidation
- Taking on new debt - A debt consolidation loan is still debt, which can bring problems. If you feel your finances are out of control and you are worried about debt, read our article ‘Where to get free debt advice’.
- Potentially more interest overall - It can be tempting to increase the loan term when you consolidate your debt to lower your monthly repayments, but this, even with a lower APR, can mean you pay more interest overall.
- Not everyone can get a loan - Successfully applying for a debt consolidation loan when you are already in debt may not be possible, especially if you do not have a strong credit score.
- Alternatives may be cheaper - Loans for consolidation are not the only way to consolidate debt, and may not be the cheapest. Some debts can be consolidated using a credit card, which could allow you to benefit from a 0% interest offer. Read our article 'What is the best way to consolidate my debt?' for more information.
- Fees - Some loans will come with set-up fees, late payment charges and early repayment charges.
Alternatives to loans for consolidation
A debt consolidation loan will not be the right option for everyone. It could be that you are anxious about taking on extra debt, struggling to get one because of your credit history, or unsure if it is the cheapest way to consolidate your debt. Here are some alternatives to consider:
- Balance transfer credit card - The cheapest way to consolidate your credit card debt is usually a balance transfer credit card. The long 0% interest period allows you to spread repaying the balance or balances you move over across many months. Most providers charge a fee to transfer a balance, though there are also free options. You can find the top cards on our 'Best 0% balance transfer credit card deals' page.
- Money transfer credit card - A money transfer credit card allows you to transfer money to your current account. This cash can then be used to pay off loans or overdrafts and you can steadily pay off the new balance over time, usually with the help of an initial 0% interest period. There is often a money transfer fee of a percentage of the amount transferred. We explain more in our article ‘How to consolidate debt with a credit card’.
- Secured loan - A secured loan will require collateral, usually your home, that will be at risk of being sold to cover what you owe if you cannot repay the debt. However, you can often borrow more with a secured loan than with an unsecured loan.
- Remortgage - Remortgaging to release equity from your home comes with more risk than a personal loan, as your home could be sold if you fail to make repayments, but you may be able to access more money at a lower rate.
- Free debt advice - If you are struggling to repay your debt, you should approach your lender directly and seek out free debt advice. There are a number of different organisations that offer independent advice on debt management for free and can even negotiate with creditors on your behalf.
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