What debt consolidation actually does
Debt consolidation means replacing several separate debts — typically credit cards, store cards or existing loans, each with their own balance, interest rate and monthly payment — with a single new loan that pays them all off, leaving you with just one balance, one interest rate and one monthly payment to manage. The calculator above compares an estimate of what your existing debts are costing you, based on their blended average interest rate, against what a single new consolidation loan at a lower rate would cost over the same period, so you can see whether the saving is likely to be worthwhile before you apply for anything.
Why consolidation can genuinely save money
Credit cards and store cards typically carry high interest rates, often well above 20% APR, particularly if you're only making minimum payments, which barely dent the balance because so much of each payment is absorbed by interest. A consolidation loan at a meaningfully lower fixed rate can substantially cut the interest you're paying on the same underlying debt, and having a single fixed monthly payment with a defined end date can also make budgeting considerably easier than juggling several different due dates, minimum payments and rates. The saving in the calculator above comes from exactly this mechanism: a lower blended rate applied to the same total balance means less of each payment is consumed by interest.
Where consolidation can go wrong
Consolidation only helps if the new rate is genuinely lower than what you're currently paying, and if you don't run the old cards back up again once they're cleared. It's a surprisingly common pattern: someone consolidates their card debt into a loan, then continues using the now-empty cards, ending up with both the new loan payment and fresh card debt on top — a materially worse position than before. If you go down the consolidation route, it's worth seriously considering closing or freezing the old cards (or at least removing them from easy everyday use) once they're cleared, precisely to avoid this trap. It's also worth checking whether your existing debts carry any early repayment charges or exit fees, since these reduce the real saving from switching, and whether the new loan comes with its own arrangement fee that needs factoring in — our true cost of borrowing calculator can help with that comparison.
Secured versus unsecured consolidation loans
Most consolidation loans are unsecured personal loans, meaning they're not tied to a specific asset like your home. Some providers offer secured consolidation loans instead, usually secured against your property, which can come with a lower interest rate in exchange for a materially higher level of risk: miss payments on a secured loan and, in the worst case, your home could ultimately be at risk, whereas an unsecured loan default has serious credit consequences but doesn't directly threaten a specific asset. Given the stakes involved, it's worth thinking carefully before converting unsecured debt into secured debt purely to chase a lower headline rate — our secured versus unsecured loan calculator lays out that trade-off in more detail.
Alternatives worth considering first
Before taking out a new consolidation loan, it's worth checking whether a 0% balance transfer card could achieve a similar or better result for card debt specifically, since a genuine 0% period means literally no interest for a defined window, provided you can realistically clear the balance (or make a solid dent in it) before the promotional rate ends and the standard rate kicks in. Our guide to 0% balance transfer cards explains how these work and the fees involved. If your total debt feels genuinely unmanageable rather than just inconvenient to track, it's also worth speaking to a free debt charity such as StepChange or National Debtline before committing to any new borrowing, since a structured debt solution may serve you better than taking on further credit, even at a lower rate. Our guide to free debt help covers where to find this support.
Using the comparison sensibly
Because your existing debts may not have a defined term (credit cards, in particular, can technically run indefinitely if only minimum payments are made), the "current cost" side of this comparison is necessarily an estimate, assuming your existing balances were repaid over the same term as the proposed new loan at their blended rate. This gives a fair, like-for-like comparison of interest cost, but in practice your existing minimum payments may be lower (and your true payoff timeline longer and more expensive) than this estimate assumes — which, if anything, means consolidation may save you even more than the headline figure suggests, provided the new loan's term isn't dramatically longer than how you'd otherwise have cleared the debt.