Consolidation loans often carry major risks and may not be your best option, particularly if you are struggling with debt.
If a consolidation loan is secured against your property, it’s like having a second mortgage, and you could lose your home if you miss repayments.
Other possible disadvantages include:
- making repayments over a much longer period of time and possibly paying more in the long run
- paying extra charges when paying off your loans and arranging others, adding to your total debt
- paying more by using a loan that charges interest to repay household bills – for example, it will be cheaper to pay off gas arrears in installments than to get a loan to repay them.
Your new loan provider may also have stricter rules on what happens if you miss payments in the future.