How to use a personal loan for safe debt consolidation

Why consolidation is on so many UK to-do lists

Debt consolidation is no longer a niche strategy - it is mainstream. Research indicates over 1.5 million UK adults plan to borrow for consolidation in 2025, totalling around £13.2bn. With household personal loan balances at record levels and the average debt consolidation loan amount climbing to about £12,433, the trend reflects a simple reality: many people want fewer moving parts, predictable payments, and a faster path out of debt.

Understanding APR is not just about percentages - it is about what you will pay in pounds and months. Credit card APRs can be punishing if balances are carried, while a fixed-rate personal loan offers a defined end date. That certainty is why 88% of borrowers who consolidate expect to clear debt sooner, largely thanks to lower fixed rates and a single payment each month. Experian’s modelling even suggests typical credit card interest payers could save over £1,300 a year by switching to a lower-rate consolidation loan, especially when tackling high APR revolving balances.

Costs are rising in places. Average unsecured personal loan rates in the UK nudged up to around 16.6% in 2025. That means the arithmetic matters. You should compare your current blended interest rate with any new loan offer, including fees, and choose a term that balances monthly affordability with total interest paid. Longer terms cut monthly strain but increase overall cost; shorter terms save interest but demand more cash flow.

The market has also widened. There has been a spike in consolidation usage and improved access for those with lower credit scores, with more pre-approved offers in the UK. That can be helpful if your credit has taken a knock, but it makes careful selection critical. Transparent terms and soft-search prequalification help you compare options without harming your score. As a UK-based retail finance broker, Kandoo helps customers assess lenders and products side-by-side so the numbers stack up before you commit.

The right consolidation loan replaces uncertainty with a clear finish line.

If you are carrying multiple balances, consolidation can simplify life. But safe consolidation is not automatic - it is the result of clear goals, disciplined budgeting, and a loan structure that reduces cost and time to repay, not the reverse.

Who benefits most from rolling debts into one?

Consolidation suits UK borrowers juggling several debts with varying APRs and due dates who want simplicity and certainty. If you are paying interest on credit cards, store cards, overdrafts, or high-cost loans, a fixed-rate personal loan could reorganise that into one payment and a set end date. It can also help if you are rebuilding your credit profile and want to demonstrate consistent on-time payments. However, consolidation is less suitable if your current debts are already low-cost, interest free, or nearly cleared. It is also not a fix for overspending on essentials; in that case, a review of income, outgoings, and support options should come first.

Key terms you need to know

• APR - The annual percentage rate reflecting interest plus standard fees, helping you compare total cost across offers.

• Fixed rate - An interest rate that does not change during the loan term, providing predictable repayments.

• Soft search - A prequalification check that shows potential rates without affecting your credit score.

• Debt-to-income ratio - Your monthly debt payments divided by monthly income, used by lenders to assess affordability.

• Early repayment - Paying off some or all of the loan before the end of the term. Check for fees and interest rebate rules.

• Term - The length of the loan, typically 36 to 84 months for consolidation in the UK.

• Total amount repayable - The total you will repay over the term, including interest and any fees.

Ways to consolidate - and where they fit

1. Fixed-rate personal loan - The most common route, suitable when your new APR beats your current blended rate and you want a clear end date. Works well for rolling multiple cards and small loans into one predictable payment.

2. 0% balance transfer credit card - Strong if you can clear the balance during the promotional window and fees are modest. Requires good credit and discipline to avoid residual balances when the promo ends.

3. Debt management plan - An informal arrangement via a charity or provider to reduce payments and interest with creditors. Helpful for acute cash flow pressure but may affect your credit file.

4. Secured homeowner loan - Larger limits and potentially lower rates by using your property as collateral. Increases risk because your home is at stake if you miss payments.

5. Overdraft refinancing - Shifting persistent overdraft usage into a fixed loan can reduce interest and provide structure. Best paired with banking habit changes to avoid slipping back.

Pounds and pitfalls at a glance

Who can qualify - and what lenders look for

UK lenders assess income stability, existing credit commitments, your credit history, and how the proposed loan affects affordability. Expect them to review your debt-to-income ratio, current limits and utilisation, recent hard searches, and any missed payments. Strong applicants tend to have consistent income, a track record of timely repayments, and a clear purpose for funds that improves their financial position. That said, access has widened, with more pre-approved eligibility surfacing even in lower credit score bands. If your profile is weaker, you may still be offered a loan but at a higher rate or lower amount. The safest path is to use soft-search prequalification to understand realistic APRs and terms before any hard check. Lenders also examine how the term aligns with your budget - shorter often costs less overall, but they will not approve if your monthly payment is not sustainable. Have recent bank statements, proof of address, and ID ready to streamline approval.

From application to clearance - the practical sequence

1. Add up all balances, APRs, and monthly payments.

2. Check your credit report across the main UK agencies.

3. Soft-search to compare rates, terms, and total repayable.

4. Choose a term balancing monthly cost and total interest.

5. Apply and provide income, ID, and recent bank statements.

6. On approval, use funds to clear listed debts immediately.

7. Confirm accounts are closed or limits reduced where appropriate.

8. Automate repayments and monitor your budget monthly.

The upsides and the trade-offs

What to check before you press go

Before committing, calculate your blended current APR and compare it with any offer, including fees. Model two or three terms to see how monthly payments and total interest change. If the new loan does not cut cost and time to repay, it is not true consolidation. Close or reduce old credit limits to avoid re-borrowing, and commit to a realistic budget that includes an emergency buffer. If your cash flow is tight this month, consider bridging strategies like payment date alignment to avoid missed payments while your application completes. Finally, read the small print on early settlement, late fees, and how interest is calculated so there are no surprises later.

If consolidation is not the right fit

1. Balance transfer to a 0% purchase or transfer card if you can clear within the promo period and fees are low.

2. Interest freeze or reduced-payment plan via a free debt advice charity such as StepChange or National Debtline.

3. Budget reset and income boost through expense audits, switching utilities, or negotiating bills before taking credit.

4. Mortgage product transfer or remortgage for homeowners who can reduce total borrowing cost - specialist advice recommended.

Frequently asked questions

Q: Will a consolidation loan hurt my credit score? A: A new account and hard check may cause a short-term dip. Over time, on-time payments and lower utilisation can improve your score.

Q: How long should my loan term be? A: Aim for the shortest term you can afford comfortably. Shorter terms reduce total interest, while longer terms can make monthly payments easier.

Q: Are rates still competitive in 2025? A: Average unsecured APRs have risen slightly. Savings are still possible if your card APRs are high, but you must compare carefully.

Q: Can I consolidate with fair or poor credit? A: Access has improved for lower score bands, often via pre-approved offers. Expect higher APRs and be selective using soft-search tools.

Q: Should I close old credit cards after consolidating? A: Reducing limits helps prevent re-borrowing. Consider keeping one low-limit card for credit history and emergencies, used sparingly and repaid in full.

Q: What fees should I watch for? A: Arrangement fees, late payment charges, and early settlement costs. Always check how fees affect APR and total amount repayable.

Ready to compare and act with clarity

If consolidation is right for you, gather your balances, soft-search for realistic APRs, and pick a term that cuts total interest. As a UK retail finance broker, Kandoo helps you compare lenders transparently and move from numbers to a funded plan that clears debt methodically.

Important information

This guide is for general information only and is not personal financial advice. Eligibility, rates, and terms vary by lender and your circumstances. Consider independent advice if you are unsure.