Simplify your debt today with a consolidation loan

A debt consolidation loan is a loan that's used to pay off other forms of credit. You could pay off:

• multiple loans
• credit cards
• store cards
• overdrafts

And this way you're just making one monthly repayment to a single lender. This should hopefully simplify your debts by keeping it all in one place so it's easier to manage.

Did you know if you've been consistently making repayments on your current credit product then your credit score might have improved? So, you could pay off your borrowing (like loans, credit cards, overdrafts) with a debt consolidation loan that has a lower APR. This means your interest rate will be lower, potentially saving you money.

If you're thinking of consolidating your loans, credit and store cards into one, you should know that it might mean extending the term of your debt, as well as increasing the total amount you repay.

If you have multiple debts (loans, credit cards, overdraft, etc.) and are struggling to repay them all each month, then consolidating those debts into one payment could make managing your finances a little easier.

A debt consolidation loan groups all your different debts together. This could mean:

• You have manageable monthly payments
• You have more time now you aren't organising different repayments
• Your budgeting is made simpler
• Your overall monthly repayments could be reduced
• You could save money by switching to a loan with a lower APR
• You could reduce your monthly repayments by spreading them out over a longer term, but this might increase the amount of interest you pay back overall
• You could reduce the term of your debt and save money on interest rates
• If you don't keep up with repayments throughout the term of your contract, then it can negatively affect your credit score. However, with just one monthly repayment to remember, you may find it easier to stay on top of your finances

Also, regularly repaying a debt consolidation loan on time could help improve your credit score in time.

• Credit cards
• Store or retail card debts
• Overdrafts
• Medical bills
• Student loans
• Other unsecured personal loans

There are debts like mortgages that can't be covered by debt consolidation loans.

The amount you can borrow will vary from lender to lender. The maximum you can consolidate will also depend on your personal circumstances, like your credit score, affordability and the lenders own criteria.

By consolidating existing borrowing, you may be extending the term of the debt and increasing the total amount you repay.

When searching for a debt consolidation loan, don't be tempted to borrow more than you need. Any amount you borrow will still need to be repaid. When checking your eligibility for a debt consolidation loan, it's worth keeping a few things in mind:

• Although you're reducing the number of debts to a single debt, you could increase the term of the loan
• You may benefit from lower monthly repayments, but the total amount repayable may be higher overall
• Be sure to compare the interest rate or APR (annual percentage rate) of your existing debts with the interest rates of the debt consolidation loan. This'll help you ensure you benefit from consolidating your debts

The risks associated with debt consolidation loans are the same as with most other types of loans. If your loan repayment is late or missed, then it can affect your credit score.

When a lender is deciding whether or not to offer you a loan, they'll use your credit score and their own criteria. If you've been rejected for a debt consolidation loan there are quite a few reasons why this could happen:

• You've missed payments (these are often called ‘defaults') for loans or credit in the past
• You've made several credit applications over a short space of time
• You're not on the electoral register (which lists the names of everyone registered to vote). Lenders use this to confirm your address and where you have lived before
• You've recently moved into a new house or have a new job
• You don't have any previous borrowing history

Yes. An independent organisation called the Money Helper offers free, impartial advice. Call 0800 011 3797 or visit the Money Helper website.