Finance Glossary
Debt Consolidation Loan
A single loan taken out to pay off multiple existing debts, combining them into one monthly payment — ideally at a lower overall interest rate. Debt consolidation loans can simplify debt management and reduce monthly outgoings, but borrowers should carefully calculate the total cost of the new loan versus the combined cost of existing debts, particularly if the term is extended.
Example
A borrower replaces a £1,200 credit card balance at 39.9% APR and a £800 payday loan with a single consolidation loan of £2,000 at 19.9% APR.
Related terms
Debt Consolidation
The process of combining multiple debts into a single loan, …
Refinancing
The process of replacing an existing loan with a new loan — …
Total Amount Repayable
The complete sum you will pay back over the life of a loan, …
Credit Score
A numerical rating assigned by credit reference agencies tha…
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