While consolidation can look like an easy fix, it can quickly make things worse if used in the wrong circumstances.
Some consolidation loans are secured, meaning your home or another asset is used as collateral. If you fail to meet repayments, the lender can repossess that asset to recover the money owed.
Even with unsecured loans, a longer repayment term can be misleading. A loan that cuts your monthly bill from £200 to £120 can sound attractive, but if it stretches over five or six years instead of three, you will pay far more overall.
There’s also a behavioural risk. Many people clear their credit cards with a new loan, then start using those cards again. That leads to two layers of debt rather than one and often a worse financial…