There are lots of different types of debt from relatively normal debt like mortgages and student loans through to bad debt like high-interest loans. But most people will have a debt of some kind, in fact, a poll by money.co.uk said that only 22% of people in the UK didn’t carry some form of debt into 2021. So 78% of people had some form of debt. There are lots of ways to get rid of debt, but one way is to consolidate your debt.

Learn more about debt consolidation here.

Work out how much debt you have

Knowing how much debt you owe is so important. There are loads of payment calculators out there where you can input balances, APR rates, and repayments over however many months to see how much your debt is actually comparing.

By doing this you’ll get a good view of where you are with your debt and where you’d be if you made larger contributions each month. Some of the numbers are likely to shock you as you can save so much money on interest by just paying off an extra 1% per month. And no one wants to pay interest if they can get away with it.

What does it mean to consolidate your debt?

If you have quite a lot of debt it can be hard to know where to start and which ones to begin paying off first. It can feel overwhelming and leave you even more worried about your financial future.

Debt consolidation is where you merge your debts into one single loan. This means you’ll have simplified repayments as you’ll just be paying off your debt in one place and not all over the shop, and it should alleviate the stress on your behalf.

You can consolidate your debt with things like credit cards, store cards, personal loans, and overdrafts. If you have all four at the moment each would have different payment dates and different interest rates making it tough to keep track of. But by merging them you’ll have one set interest rate and one clear loan term where you’ll know when you’ll be debt-free.

Things to consider before you consolidate your debt

Even if your new consolidated loan has a lower interest rate than some of your debt, if the payment terms or timeline is different you may end up paying more each month on your new debt, so ensure you can afford it.

If you’re paying less per month but can afford to pay more don’t be afraid to overpay. The more you do this the quicker you’ll have it cleared off.

If you want to get a debt consolidation loan make sure you note down the repayment amounts of every single piece of debt you have so you know you’re applying for enough money to cover it. The last thing you want is to forget one of your debts or realise that one of your loans has an early repayment fee that you’ll need to pay. Plus if you have some smaller debts maybe consider clearing them off for ease before getting your loan consolidation.

How to get a debt consolidation loan

Once you know exactly how much you owe this is how much you’ll need to apply for your debt consolidation loan. Once your loan has been approved you can use that loan to pay off all your existing borrowing.

Having just one loan reduces the number of monthly repayments and keeps everything together in one space.

If you need further support you can speak to a free debt charity like StepChange or PayPlan who can go through your situation and help with a plan over the phone.