Calculate your debt consolidation savings

Consolidating debts means combining multiple debts, such as credit cards, overdrafts, and personal loans, into one loan with just one monthly payment. Instead of paying several different creditors on different dates and at different interest rates, you make a single monthly payment to one lender, simplifying your finances and making it easier to manage repayments.

For homeowners, this typically involves a secured loan (also called a homeowner loan or second charge mortgage), which uses your property as security. This allows lenders to offer lower interest rates than unsecured credit cards and personal loans.

Here is a simplified example: Sarah has £18,000 across three credit cards at an average of 22% APR, plus a £7,000 personal loan at 15% APR. Her total monthly payments are £820. By consolidating into a £25,000 secured loan at 8.9% APR over 10 years, her new payment drops to £315 monthly, saving £505 each month.

However, this is not the complete picture. While monthly payments often drop significantly, borrowing over a longer period can mean paying more interest overall, even if your monthly payments are lower. A debt consolidation calculator shows you both figures so you can make an informed decision.

The calculator provides several key figures. Here is what each one means and how to interpret them.

Your estimated monthly payment

This is your estimated fixed monthly payment on a consolidated secured loan at an indicative rate. The figure combines principal repayment and interest into one fixed amount. A fixed monthly repayment makes budgeting easier and helps you manage your finances more effectively.

If you are paying £820 monthly across multiple debts and the calculator shows £350, you would free up £470 monthly. That is money you could use for emergencies, savings, or everyday expenses.

Total amount repayable

This figure shows what you will pay back in total over the full loan term: the original amount borrowed plus all interest charges. For example, a £35,000 loan over 15 years at 8.5% APR means monthly payments of approximately £345 and a total repayable of £62,100. You would pay £27,100 in interest over the term.

Your indicative interest rate

The rate shown is based on a representative APR, a standard rate used to illustrate typical borrowing costs. Your actual rate depends on your credit history, property equity, income, and other personal factors. Current secured loan rates for debt consolidation typically range from 5.9% to 15.9% representative APR.

• Excellent credit (750+ score): 5.9-8.5% APR
• Good credit (650-749): 8.5-11.5% APR
• Fair credit (550-649): 11.5-14.5% APR
• Adverse credit (below 550): 14.5-18.9%+ APR

Interest saved vs paid

If you are consolidating high-interest debts, you may see substantial interest savings despite extending the term. Alternatively, you might see that total interest increases but monthly payments become manageable.

Neither outcome is automatically right or wrong. A family struggling with £900 monthly debt payments might accept paying £8,000 more in total interest over 15 years if it means £400 monthly payments they can actually afford. Someone with stable income might prefer a 7-year term that costs less overall even if monthly payments are higher.

Several factors influence the rates and terms available to you. Understanding these helps you interpret calculator results and improve your actual application.

Your available equity

Equity is the portion of your property you own outright: the value minus what you owe on your mortgage. Lenders use loan-to-value (LTV) ratio to assess applications.

If your home is worth £300,000 and you owe £180,000, you have £120,000 in equity (40% of property value). Most consolidation lenders allow borrowing up to 85% LTV, meaning you could potentially access up to £75,000. Higher equity generally means better rates. Keeping total borrowing below 70% LTV typically unlocks the most competitive rates.

Your credit profile

Your credit history is the primary driver of the interest rate you receive. Lenders price risk: borrowers with defaults, CCJs, or missed payments present higher risk and face higher rates. However, specialist lenders exist specifically for adverse credit situations.

Credit cards and other unsecured debts at high interest rates often damage credit scores through high utilisation. Consolidating can actually improve your credit profile over time by reducing utilisation and simplifying payments.

The amount you want to consolidate

Most secured consolidation loans range from £10,000 to £500,000. Borrowing below £15,000 sometimes proves uneconomical because setup costs represent a larger proportion of the loan. Larger loans often access better rates because lenders earn more over the loan term.

Your chosen loan term

Term length creates the classic trade-off between monthly affordability and total cost. The following table illustrates how different terms affect a £40,000 consolidation at 9% APR.

Your income and affordability

Lenders verify you can afford repayments. Affordability assessments consider your income, existing commitments, and typical living costs. If your total monthly debt payments (including the new loan) exceed 45-50% of gross income, approval becomes difficult regardless of equity.

Self-employed applicants typically need two years of accounts. Directors can use a combination of salary and dividends. Contract workers may qualify with their contract value if sufficient term remains.

Consolidation loans involve several fees beyond the interest rate. Understanding these ensures the calculator results reflect reality.

Broker fees

Working with a broker typically involves either a percentage fee (usually 1-3% of the loan) or a flat fee. The fee structure depends on loan size and complexity, and exact costs are confirmed before any commitment.

Lender arrangement fees

Most secured loan lenders charge arrangement fees between £500 and £1,500. These can usually be added to the loan rather than paid upfront, though this means you pay interest on them over the term. Some lenders offer fee-free products but charge higher interest rates to compensate.

Valuation costs

Lenders require a property valuation before completion. Costs range from £150 for desktop valuations to £400+ for physical inspections of higher-value properties.

Legal fees

Secured loans require legal work to register the second charge against your property. Expect to pay £300-£600 in legal fees.

Debt consolidation through a secured loan is not right for everyone. Consider these factors carefully before proceeding.

Your home is at risk

This is the most important consideration. Secured loans use your property as security. If you cannot maintain repayments, the lender can ultimately repossess and sell your home to recover their debt.

Before consolidating unsecured debts into a secured loan, honestly assess your job security, income stability, and ability to keep paying if circumstances change. Credit card debt, while expensive, does not put your home at risk. A secured consolidation loan does.

You may pay more overall

While monthly payments often decrease dramatically, extending debts over 10-20 years frequently costs more in total interest than paying them off faster at higher rates.

If you consolidate £30,000 of credit cards and end up paying £50,000 total over 15 years, that is £20,000 in interest. Aggressively paying down the cards over 4 years might have cost £12,000 in interest despite the higher rates.

Early repayment charges apply

Most consolidation loans include early repayment charges (ERCs) during an initial period, typically 3-7 years. If you want to repay early or remortgage, these charges can cost 3-5% of the outstanding balance.

It does not fix spending habits

Consolidation clears credit cards, but those cards still exist with their available credit restored. Without addressing whatever caused the debt accumulation, some borrowers run up new debts while still paying the consolidation loan, ending up worse off than before.

Consider whether budgeting support is needed alongside consolidation. Free debt charities like StepChange can provide guidance before or alongside arranging consolidation.

Running the calculator multiple times with different inputs helps you understand your options. Try adjusting the loan amount, loan period, and repayment term to see how monthly payments and total interest change.

Short term vs long term

Running the calculator with the same loan amount but different terms clearly shows how the repayment period affects both monthly payments and total costs. A longer loan period means lower monthly payments but more interest overall.

The difference between a 7-year and 20-year loan period is £37,584 in additional interest but also £301 lower monthly payments. Neither option is inherently better: it depends on what you need.

Partial vs full consolidation

You do not have to consolidate everything. Sometimes consolidating only high-interest debts makes more sense. For example, someone with £20,000 on credit cards at 22% APR and a £10,000 car loan at 6% APR might consolidate only the credit cards, keeping the cheaper car finance separate.

With and without setup costs

Try calculations with setup costs added to the loan versus paid upfront. Adding £2,000 in fees to a £35,000 loan means borrowing £37,000, which increases both monthly payments and total interest. If you have savings to cover setup costs, paying them separately keeps the loan smaller.

Based on thousands of consolidation cases, these are the most frequent errors with consolidation calculations and applications.

Forgetting about existing early repayment charges

Some debts carry penalties for early settlement. A personal loan might charge two months' interest, or a car finance agreement might have settlement fees. Before assuming you can consolidate, check settlement figures for all debts. A £15,000 loan with £600 early repayment charges effectively costs £15,600 to consolidate.

Underestimating current monthly payments

When adding up current payments, people often miss the small ones: the £30 store card minimum, the £50 overdraft interest. These add up and affect your comparison. List every single debt payment to get an accurate picture.

Ignoring payment protection insurance

Some existing debts include PPI or similar protection. When you consolidate and close those accounts, that protection ends. If income protection matters to you, factor in the cost of replacing it.

Comparing wrong figures

Compare like with like. If your current debts would take 5 years to clear at current payments, compare total costs over those 5 years against a 5-year consolidation loan, not a 15-year loan. Be clear about what you are optimising for.

Not accounting for future changes

If you expect income increases, consider whether higher payments on a shorter term might become affordable soon. If you are approaching retirement, consider whether you can realistically maintain payments for 15-20 years.

The calculator gives you indicative figures based on typical rates. Here is how to move from estimates to actual offers.

Getting a personalised quote

Calculator results are starting points. To get actual rates and terms based on your specific circumstances, a proper assessment is needed. An advisor will ask about your income, employment, credit history, and property. This soft-search assessment does not affect your credit score but gives a much more accurate picture than calculator estimates.

The application process

The formal application process typically takes 2-4 weeks from application to funds in your account. Applications are submitted to suitable lenders, with most decisions in principle arriving within 48 hours. A property valuation follows within 5-7 days, then legal work completes the second charge registration.

Managing your new loan

Once consolidated, you have one monthly payment to one lender. Most consolidation loans allow overpayments up to 10% annually without charges. If your circumstances improve, making overpayments reduces your balance faster and saves interest. Consider reducing credit limits on cleared cards to avoid the temptation of running up new debts.