IVA Advice Guide – How to Consolidate Debt

IVA.TV - To speak to an IVA Advisor please call UK 0800 048 3651

Advice for Debt Consolidation Solutions


IVA.TV have reproduced the Crown Copyright Guide on Consolidating Debts. Often people with debt will try and borrow their way out of debt. Clearly this won't work and will lead to larger debt problems. IVA.TV can advise on the Best Debt Consolidation Solution to meet your needs. These include IVA (Scottish equivalent Protected Trust Deed), Debt Management Plans, Bankruptcy (Sequestration Scotland).

Debt Consolidation Definition. What is Debt Consolidation?

Debt Consolidation definition: Debt Consolidation is where your debts are restructured into one single affordable monthly payment ideally at a lower monthly outgoing than the sum of the previous outgoings.

Debt Consolidation Loan Benefits

A Debt Consolidation Loan can be a great way to do this by consolidating high interest store card and credit cards with one lower rate loan. The lowest rates can often be found when consolidating through a home loan or remortgage as the lender has the added security of your property. A Debt Consolidation Loan can also reduce your monthly outgoings by spreading your payments over a longer term.

Debt Consolidation Alternatives

Debt Consolidation Solutions range from Debt Consolidation Loans, remortgages, debt management, Bankruptcy (may enable substantial write-off of debts where applicable), IVA or Trust Deeds (Scotland).

Guide on Debt Consolidation

Consolidating debt is when you take out a single, new loan to pay off several existing debts. This can be a good way of taking control of your finances but you need to be careful. A consolidation loan may not always be your best option.

Before considering a consolidation loan

Before you decide on a consolidation loan, find out what’s on offer and what alternatives you’ve got. These could include:

  • trying to make new arrangements with your existing lenders
  • checking that you’re making the best use of credit options you’ve already got – such as an overdraft facility, credit or store cards, a personal loan or extension to your mortgage
  • borrowing from relatives

If you do decide to take out a consolidation loan, shop around for the best terms from a reputable lender. Building societies and banks may be able to offer you a personal loan.

IVA.TV can advise whether a debt consolidation loan is a suitable solution to your debt problem. We can also advise on other options including debt management plans, Individual Voluntary Arrangements (IVA) or in severe cases Bankruptcy. In Scotland equivalents are Protected trust deeds and Sequestration.

Reasons to consider a consolidation loan

Used carefully, a consolidation loan can help to put you back in control of your finances. The advantages can include:

  • you can use it to pay off your priority debts (for more about priority debts, see the link ‘Which debts to pay off first’ below)
  • you could pay a lower rate of interest – interest rates for borrowing money for a short while are usually very high (consolidation loans are longer term and may be better value than short-term borrowing)
  • your monthly payments might be lower
  • you know when you’ll finish paying off the debt
  • you’ll only have to make a single payment each month
  • you’ll only deal with one lender
  • you may avoid falling behind on payments and getting a bad credit rating

Possible disadvantages of consolidation loans

Remember that there are some drawbacks too, such as:

  • you could end up paying more overall and over a longer period
  • you’ll usually pay extra charges for setting up and repaying the new loan
  • if the loans you’re consolidating had the interest added at the start, you’ll be paying interest on that interest – as well as on the amount you borrowed
  • all your eggs will be in one basket – if you get into difficulties, it may be more difficult to come to a new arrangement with a single lender
  • if the loan is secured against your home your property will be at risk if you can’t keep up payments

How to choose a consolidation loan

Always shop around for the best terms – it’ll save you money. Make sure you understand all the terms and conditions of the loan, such as:

  • how long you’ll be making repayments and how much you’ll pay back altogether
  • the interest rate and whether it can change
  • what the monthly repayments are and what happens if you miss one
  • any penalties or costs you’ll have to pay if you want to repay it early
  • what happens if it’s secured on your home and you can’t keep up the repayments

Once you’ve arranged the loan, aim to keep your finances under tight control – for example, cut up you credit cards and don’t let the debt build up again. Be aware that the lender may put pressure on you to borrow more by extending the loan.

You’ll be encouraged to take out insurance with your loan. Make sure you’re clear about the terms, that you really need it and that you’ll be able to claim on it if you need to.


For further advice please contact IVA.tv.

Information in the above IVA Advice Guides and Debt Advice Guides includes extracts from Crown Copyright Advice Guides Direct Gov UK

Common Debt Consolidation Misspellings: Consilidation, Consolodation, consoladation, debt managment, I.v.a., dept consolidation, dept management, depts, consoldation