Consolidation replaces several debts with one loan. The appeal is simplicity: one payment, one date, one balance that visibly reduces. But it only makes sense if the arithmetic works, and it does not always.
When it helps
It tends to help when you are juggling several due dates, when the interest across your existing balances is higher than the rate you would be offered, or when revolving credit means your balance never really falls.
When it does not
Consolidating over a much longer term can lower the monthly payment while increasing the total interest paid. Clearing cards and then using them again leaves you with the loan and the card balances. And if a debt is already in arrears, a repayment arrangement with that creditor may serve you better.
Compare the total, not the monthly figure
The honest comparison is total cost against total cost. Add up what you would pay across your existing balances if you continued as you are, then compare that with the total repayable on the consolidation loan. Our calculator gives you the second number in seconds.
If the total is higher and the only gain is a lower monthly payment, be clear with yourself that you are buying breathing room and paying for it.
Common questions
Do you pay my creditors directly?
Funds are released to your account and you clear the balances. Do it promptly — the loan starts accruing interest either way.
Will this improve my credit file?
It can, if it means payments are made on time and balances fall. It will not if the cleared accounts are used again.
