Debt Consolidation Loans

A debt consolidation loan allows you to combine all your current debts into a single loan, so you’ll only need to make one payment each month. Here’s how it works:

• Find out what you owe
  Examine your current credit card, loan, and overdraft debts. Add up how much you owe in total, including the outstanding balance, plus interest and any fees. You can then calculate the total loan amount required to cover all your existing debts.
  
  
• Choose the right loan for you
  Once you know the amount you need to borrow, the next step is to find a personal loan provider. Our personal loans start from just 7.4% APR Representative (£7,500-£25,000). You can borrow from £1,000 to £35,000 and pay it back over 2 to 7 years. Simply choose the loan amount and term to suit you. Apply online in minutes and you could get an instant decision on your application.
  
  
• Pay off your existing debt with the loan
  Use the loan to pay off existing debt. Having one loan means you will only have a single payment to make each month.
  
  
• Make your monthly repayments
  After you've paid off your existing debts, you'll repay the consolidation loan within the agreed time frame. You may find this much easier to manage as you’ll now only have one payment to think about. With Novuna Personal Finance, you can manage your account online or via our app. Make a payment, check your balance, manage your details and so much more.

You may wish to seek further advice on whether a debt consolidation loan is the right option for managing your debt before applying. Contact free debt advice charity StepChange for more information.

You can use a loan to pay off various forms of debt, including:

• Credit cards
  Credit cards typically have high interest rates (30.4% on average*). This makes borrowing money over a long period of time a costly option. Our experts share the difference between personal loans and credit cards here if you want to find out more.
  
  
• Other loans
  Unsecured loans (a type of loan that doesn’t require you to put up collateral), are frequently used to finance a variety of big purchases from cars to weddings and everything in between.
  
  
• Overdraft
  Most banks will charge high interest rates if you spend more money than you have in your current account. This debt can soon add up if you don’t repay it quickly.
  
  
• Store cards
  The main benefit of a store card is it can provide upfront discounts on purchases. Typically, if you pay your balance in full each month, you won't be charged interest. If you don't repay your debt on time though, you may have to pay high interest rates and fees.

It’s very easy for debt to mount up if you don’t pay off what you owe quickly. It may be more cost-effective and less stressful to consolidate your high-interest debts into one low-cost loan. This way, you will only have one loan to think about.

*Source: Moneyfacts

The cost of your loan will depend on several factors. These include how much you wish to borrow, the loan duration, and the interest rate.

We will make a decision on your interest rate based on your credit history, personal circumstance, loan amount and term. This means there’s no definitive way to tell you how much your loan will cost. However, you can use our loan calculator to get an estimated idea of monthly and total repayment costs.

You can find out everything you need to know about personal loans here.

Managing multiple debts from different lenders, including credit cards, store cards, overdrafts and personal loans, can be overwhelming.

Not knowing how to prioritise your debts due to varying interest rates and payment frequencies can make your finances feel out of control. But it doesn’t need to be that way. Debt consolidation can help you organise your repayments and reduce financial stress.

Here are some advantages and disadvantages of debt consolidation loans to help you make the best decision:

Pros:

• Lower your monthly costs
  This is especially useful if you have a large number of outstanding bills that are generating interest.
  
  
• Has the potential to reduce overall interest
  APRs on debt consolidation loans are typically lower than those on some store cards or credit cards and therefore could reduce the overall interest.
  
  
• Easier to manage
  Managing one payment per month can be easier than managing several at once.
  
  
• Improve your credit score
  It's can be quicker to pay off one debt with just one monthly repayment to worry about, and paying off your debts can help your credit score.

Cons:

• Missed payments have consequences
  If you do not make your monthly payments in full, your credit score will be affected.
  
  
• Set up fees
  Your existing creditors may charge a fee for transferring or paying off your balance. Make sure to read the terms and conditions before making a decision.
  
  
• Other options are available
  A 0% balance transfer credit card, for example, may be appropriate for someone with smaller debts. Carefully read and understand the T&Cs, though, to make sure it's a suitable option for you.
  
  
• Increased interest
  Taking out a loan over a long time can lead to you potentially paying more interest overall. This may still be the best choice for you if you’d rather keep your monthly repayments down and spread the cost over a longer period.

You may wish to also seek advice from a debt charity such as StepChange on whether a debt consolidation loan is the right option for you before applying.

Taking out a personal loan to pay off multiple high-interest debts (such as credit cards or overdrafts) can potentially reduce the overall amount of interest you pay each month. Debt consolidation will only be cheaper if the loan has a lower interest rate than your existing debt. However, if you extend your loan term, you could end up paying more interest in total.

Our personal loans have competitive interest rates starting from as low as 7.4% APR Representative (£7,500-£25,000). If you’re paying much greater interest across several credit cards and other debts, you could reduce your monthly payments by using a loan to consolidate your debts.

A personal loan from Novuna Personal Finance is an unsecured loan. This means you can borrow money without putting up collateral, such as your house or car. If you fail to make your repayments, your assets won’t be repossessed. However, any late or missed payments will still be recorded on your credit file which could make it more difficult or more expensive to borrow in the future.

As unsecured loans don’t require you to put up collateral, we’ll decide whether to lend money to you based on your personal circumstances, credit history, loan amount and term.

Find out more about the difference between unsecured and secured loans.

Some credit cards, such as a 0% balance transfer credit card, may be appropriate for someone with smaller debts. However, these offers come with strict conditions and time frames. If you don’t pay what you owe in full and on time, it may cost you more in the long run.

A loan may be more suitable if you have debts of over £1,000 you wish to consolidate. Choose to pay your loan back over a time frame that suits you.

You could take out a loan over a shorter period of time and pay a higher monthly amount. This will help you pay off your debts sooner. Alternatively, you can spread your loan over a longer period of time. This will reduce your monthly payments, but you will pay more interest in total this way.

It’s important to make your monthly repayments on time each month. If you don't, it will be recorded on your credit file. This could make borrowing more expensive in the future, or even limit your ability to borrow at all.

If you’re unable to repay your loan, we’re here to help. It’s important that you contact our team on 0344 375 5488. Once we understand your current circumstances, we’ll be able to advise the most suitable option or establish a payment arrangement that is affordable for you. We may ask for information about your financial situation to ensure we put the most suitable arrangement in place.

If you’re experiencing financial difficulties, we may signpost you to a free debt charity called StepChange, who will be able to offer you confidential support.