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Do Debt Consolidation Loans Cause More Debt?

Debt Consolidation Loans alone are not responsible for causing debt levels to increase. Other factors contribute to this. Find out more here.
A man holding a big debt money bag.

It is a common misconception that Debt Consolidation Loans cause people to be in more debt, rather than improve their financial situation. However, what many people fail to understand is that a Debt Consolidation Loan is in fact a good debt solution for many people.

Consolidation Loans are designed to support people in repaying their debts, it is other factors that can occasionally cause people to increase their debt level… Let’s discuss this further.

How could a Debt Consolidation Loan better your financial situation?

There are many ways that a debt consolidation loan could improve your financial circumstances:

  • Monthly unsecured debt repayments are combined into ONE monthly payment that is affordable.
  • Finances become easier to track and manage.
  • You may find that your monthly repayment total has decreased.
  • It may work out cheaper in the long run; if your payments are easier to manage you may be less likely to miss payments and face interest and charges.
  • You will only owe money to 1 company (that’s a lot less creditors to deal with!)

What factors contribute to people’s debt level increasing?

As previously mentioned, it is other decisions that people who have consolidated their debts make, that contribute to their debt level increasing such as taking out a higher amount of credit than their existing debt level.

Another reason the overall debt level could increase, is depending on the APR offered on the loan, if this is higher than the original interest amounts, it could increase the overall amount payable.

A large money bag surrounded by coins.

Financial advice is available

Here at Consolidation Express, we specialise in supporting people who are in debt. We offer Debt Consolidation Loans of up to £75K and could get you the money you need in as little as 2 hours! We also consider all credit scores and only run a soft credit search on all our customers. Get in touch for help with your debts!

Consolidate My Debts
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.