So, what is a debt consolidation loan? A debt consolidation loan can be used to pay off multiple loans, credit cards, store cards or overdrafts so that each month you just make one single monthly repayment to a single lender. This simplifies the debt, keeping it all in one place and potentially making it easier to manage.
You could also use a debt consolidation loan to pay off just one credit product (e.g. a single personal loan or credit card) that has a higher APR. If you’ve been consistently making repayments for a while, your credit score may have improved since you first took out your current credit products. This means you might now be eligible for a better rate and able to reduce the amount of interest you’re paying by switching to a debt consolidation loan with a lower APR.
If you’re thinking of consolidating your loans, credit and store cards into one, you should know that it might mean extending the term (that’s the length in months) of your debt, as well as increasing the total amount you repay.