Skip to content

How Does Credit Card Debt Consolidation Work?

One of the more common questions we hear is ‘how does credit card debt consolidation work’? Here we explain how to consolidate your cards.
An advisor tying credit cards together.

Although we help deal with a variety of unsecured debts, credit cards are probably one of the most common. Consequently, one of the most frequent questions we hear is ‘how does credit card debt consolidation work’?

To help answer this, we’ve detailed just about everything you need to know about how a loan can consolidate your credit cards:

How does consolidating credit cards work?

Credit card debt consolidation is when you take out a loan equal to – or just exceeds – the combined value of your accounts. Once approved, you use the money provided to repay your creditors one-by-one. You do this until you’re left with one lender to repay – the consolidation loan provider.

The process is often relatively straightforward, and you should be able to clear your credit cards within 24 hours of receiving the loan.

It’s important to check the terms and conditions of your credit cards and loans as you want to ensure you’re paying less interest or can clear your debts faster through the money provided.

Fortunately, as a consolidation loan broker it’s in our best interests to make sure you get the best deal possible. We’ll never recommend a loan which puts you in a worse financial position.

Consolidating credit card debt through balance transfer

A man holding a bank card.

Balance transfer is when a financial company will offer a zero per cent interest (or low-interest) introductory offer to consolidate your credit cards. In this case, you’re just moving the balances of credit cards onto one account.

While the offer is active, your rate of interest could be non-existent. As a result, this option can give you some much-needed breathing room. However, it can be very risky.

For example, if you don’t clear your debts within the introductory period, your rate of interest will increase. Furthermore, should you miss a payment, it’s common for the provider to increase the interest rate.

Consequently, if this option isn’t managed carefully, it can become very expensive.

I have bad credit, can I consolidate my credit cards?

With balance transfers, the best offers are usually reserved for those with good credit histories. Therefore, those with poor or bad credit may have difficulty acquiring one. However, it’s often much easier to get a consolidation loan with bad credit.

In our case, we believe a poor credit history shouldn’t get in the way of your application – especially as you’re trying to regain control of your finances. Therefore, we promise to consider all credit scores – no matter how bad.

Got Bad Credit?

What do I need to know about debt consolidation?

Although some solutions write off or reduce what you owe, this isn’t true in the case of debt consolidation. You’ll still have the same amount of money to repay but you’ll owe one lender instead of several.

This means you’ll only have one interest rate to manage and one monthly payment to keep. This should make your financial situation much easier to control and could leave you paying less every month.

A man on the phone with Consolidation Express.

Is credit card consolidation right for me?

To find out whether credit card debt consolidation is right for you, feel free to give one of our specialist debt advisors a ring. They deal with this subject every day and will be able to determine – in a matter of minutes – whether this option would benefit you.

Consolidate My Credit Cards
An advisor pointing to a screen displaying Rep APR.

APRs from 5.8% to 89.9%

We are a broker, not a lender.

Unsecured Loan Representative 69.9% APR

Borrowing £7,500 over 36 months, repaying £502 per month, total repayable £18,083. Total cost of credit £10,583. Interest rate 69.9% (variable). The lenders on our panel offer loans for 12-60 months, with rates from 5.8% APR to 89.9% APR. The Representative Example is based on all loans paid out by lenders between 19th Apr 2022 and 23rd Dec 2022.

Secured Representative 11.7% APR

If you choose to add fees to the loan: Assumed borrowing of £25,000 over 120 months, plus a broker fee of £2,500 and a lender fee of £250 would result in monthly repayments of £345.55, the borrowing rate is 8.6% (variable), the APRC is 11.7% (variable), total charge for credit £16,466.00 and the total amount payable £41,466.00. You can opt to pay the lender and/or broker fees upfront, your adviser will discuss these options with you.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. All rates vary subject to loan amount, loan type and status. Repaying your debt over a longer period of time may increase the amount you pay.

Further reading

What are the Different Kinds of Unsecured Loans?

Understand what an unsecured loan is, and how best to use the different kinds of unsecured loans in 2023.

What are the Different Types of Secured Loans?

With so many different types of loans available, it can be difficult to know which is right for you. For more information on secured loans, read this expert article.

Persistent Debt – What Does it Mean for Your Credit?

Persistent debt can affect your credit rating for a significant time period. Read to find out more.