How to consolidate your debt

If you’ve started an application already, it’s easy to pick up where you left off.

As a lender, we have a responsibility to act fairly and as part of this we have committed to follow the Standards of Lending Practice. This note sets out some of our key responsibilities and what we ask of you, to ensure that the relationship works well for both of us.

• We will lend responsibly and aim to provide a product that is affordable for you.
• We will provide you with information about our products and services and how they work, in a clear and understandable way, so that you can decide what’s best for you and your needs.
• We will endeavour to make sure our products and services offer, wherever possible, the flexibility to meet your needs.
• We will treat you fairly and reasonably at all times and make sure that you are provided with a high level of service.
• If you tell us about any inaccuracies, for example around the personal information we hold about you, we will act quickly to put it right.
• We will always aim to help you if we see, or you tell us, that you are having trouble financially. We will seek to understand your overall circumstances, try and identify options that you can afford and where appropriate, provide a reference to free debt advice.

What we ask of you

• We ask you to think carefully about whether you can afford to repay the money you want to borrow and to be open in your dealings with us.
• Take care of any cards, PINs, online log-in details and other security information to help prevent fraud and help us to protect your accounts.
• Tell us as soon as possible if your card has been lost or stolen, or if you know or suspect someone is misusing your confidential information e.g. your PIN or online log-in details.
• Carefully check your account statements to make sure they are accurate. If anything isn’t right, please get in touch with us.

Please let us know if

• Your contact details change, so we can keep our records up to date.
• Your circumstances change, particularly if what’s happened is likely to cause you difficulties in managing your account or financial problems.
• You think that you won’t be able to keep up with your repayments. The sooner you do this, the more likely it is we’ll be able to find a way to help you.

We would also encourage you to refer to the terms and conditions associated with your current account, credit card or personal loan.

Debt consolidation can be a useful way to manage debt. Check your options to see if it’s right for you and your circumstances.

A loan to consolidate your outgoings

For most people, a debt consolidation loan involves taking out a single loan that pays off your existing debts. This could work out cheaper if you’re offered a lower rate of interest overall, when comparing it to your other debts’ interest rates.

It won’t reduce the amount that you owe, but it’ll give you a chance to manage your debt in a simpler way – by paying the loan off with a single monthly payment.

When you consolidate your other borrowing into a single loan, you may be charged early repayment fees. If you don’t want to pay these fees, you may prefer to keep your debts separate.

If you do consolidate your debt, just make sure you don’t borrow more until you’re sure you can afford it.

Still not sure? It’s best to talk to an expert to see if a debt consolidation loan is right for you. They can talk you through the pros and cons, and may offer you other options that you hadn’t yet considered.

You can call a free helpline, such as the National Debtline on 0808 808 4000, or you can get in touch with the Citizens Advice Bureau.

It pays to do your research on the different ways you can manage your debt – as it could save you money in the long run. Whichever option you choose, try to deal with your most urgent debts now – things like your rent or mortgage payments, and council tax. These are called priority debts. Not paying them could mean huge penalties, such as having your home repossessed, or possibly even a prison sentence. We’ve listed some of the ways you could manage your debt.

Debt consolidation loan

As we’ve mentioned, a debt consolidation loan is where you take out one large loan that pays off your existing debts. It’s usually arranged by you through a bank. These types of loan are usually used to pay off credit card and other personal loan debts.

Debt management plan

This is a plan between you and your creditors to pay off all your debt. It’s an agreement that’s arranged through a debt management company. Generally, but not always, your creditors will freeze the interest and penalties so that you can begin to reduce your debts more quickly.

Administration Order

You can apply to the county court for an Administration Order if your debts are under £5,000 and you have a county court judgment (CCJ). You don’t need to pay a fee to apply and the court decides what you pay back, depending on your income.

Individual Voluntary Arrangement (IVA)

An IVA is an agreement you make with your creditors through a court. You’ll need to set this up through an insolvency practitioner. This is a formal, legal debt solution, so if you don’t keep up repayments, you can be made bankrupt.

For more information on debt and ways to manage it, you can contact Citizens Advice.

• Help from Citizens Advice Bureau