Debt consolidation loans
Consolidating your debts could help you take control of your money
Depending on the interest rate and how long you take to repay, you could end up paying more in total. Think about the overall cost when making your decision.
With our partner, ClearScore, you can find out what loans you could be eligible for. ClearScore are a credit broker, not a lender. Together we give you access to carefully selected panel of lenders.
What is a debt consolidation loan?
You can use a debt consolidation loan to pay off existing debts into one monthly repayment, like:
- credit cards
- personal loans
- store cards
- or overdrafts.
This can make managing your debts simpler and make it easier to keep a track of your monthly outgoings with one fixed monthly payment.
Credit cards, store cards, and overdrafts may have a higher interest rate, or APR, than a debt consolidation loan. You may be able to get a loan with a lower interest rate to pay off these debts dependent on your financial circumstances and the eligibility criteria. This may not always be the case and you will need to check when you apply.
Secured vs unsecured loans
There are 2 types of loans which could help with debt consolidation: unsecured personal loans and secured homeowner loans.
A secured loan (also known as a homeowner loan) is a type of loan suitable for people who own a home with a mortgage. This loan is separate from your current mortgage. You can borrow between £10,000 and £500,000+ over 1 to 30 years, subject to lender's affordability assessment.
With an unsecured loan the lender looks at things like your income and credit history to decide if you can get the loan. These loans are often faster to get but might cost more. You can borrow up to £25,000 with unsecured personal loans from Co-op.
You do not need to know which loan type you need. When you use the eligibility checker online, it will automatically show your options. Secured loans will only appear if you're a homeowner with a mortgage.
See our guide on secured and unsecured loans for more information about the differences.
Reasons to choose
Compare your options
Multiple loan offers tailored to you, subject to lender's affordability assessment.
No impact on credit score
With a soft eligibility check it will not impact your credit score when comparing loans.
Choose your repayment terms
Loan terms from 1 to 30 years, subject to lender's affordability assessment.
Co-op Member Prices
Co-op Members could get exclusive rates on unsecured loans from selected lenders. Discounted rates depend on your circumstances and the eligibility criteria. Secured loans are not included. Members also get:
- lower prices in our food stores and online
- personalised offers every week
- access to presale tickets for Co-op Live, the UK's biggest arena
- a say in how Co-op is run
If you’re not yet a Co-op Member, you can sign up using the ‘Become a member’ button. This will include a one-off £1 joining fee.
Application process
How getting loan works with our partner ClearScore:
- Eligibility check: fill in the online form and ClearScore will run an eligibility and soft credit check. This will not affect your credit score.
- Loan options: if you pass, you will see a list of loans showing how much you could borrow and the costs. If you choose a secured loan a qualified adviser will call to go through your application.
- Payment: if you get approved for a loan, the money will be sent directly to your account. For unsecured loans this is normally on the same day you apply. For secured loans this might take several weeks.
Why get a debt consolidation loan?
Combine your monthly payments
Combining your monthly payments means you only have one payment and interest rate to keep track of. You might end up paying more interest because you will be paying back over a longer term
Reduce your monthly payments
A debt consolidation loan could have a lower interest rate than the combined rate of your existing debts, dependent on your financial circumstances and the eligibility criteria. This may not always be the case and you will need to check when you apply.
Manage your budget
A debt consolidation loan combines your debts into one monthly repayment. Which could help you to budget better by reducing the amount of monthly payments you have.
Improve your credit rating
Your credit rating could improve if you don't miss any monthly payments, and pay your debt back in the loan term.
What should I be aware of before I consolidate my debt?
Be careful not to increase spending
Borrowing with a debt consolidation loan to pay off spending can make it feel like you have more money available. It is important to remember that overspending again will increase your overall debt and may mean you struggle to repay your debts.
Only borrow what you need
You will still need to repay your loan each month until the end of its term, so be careful not to request more than you need. You should ask for the minimum you need to cover your other debts.
The risk of losing your home with a secured loan
If you're getting a secured homeowner loan to pay off unsecured debts, think carefully. It might not be the best choice. Missing payments could mean losing your home.
The risk of missing monthly repayments
Make sure you can afford the monthly repayment amount for a debt consolidation loan. If you miss any payments it can damage your credit score.
You could be increasing your overall debt
A debt consolidation loan may save you money each month with a lower repayment. But be aware that by extending the term of your debts you could pay more interest and increase the amount you repay overall.
Understanding the full cost of your loan
Representative example for secured loans
Secured loans from Co-op have a representative APRC of 13.24% (variable). For example, borrowing £25,000 over 10 years with a broker fee of £2,875 and a lender fee of £595 means you’ll pay £365.91 each month. The charge for credit would be £18,909.20. In total, you would repay £43,909.20.
Representative example for unsecured loans
Unsecured personal loans from Co-op have a representative APR of 23.8% (fixed). For example, borrowing £7,500 at a fixed annual interest rate of 23.8% over 5 years means you will pay £214.89 each month. In total, you would repay £12,893.40.
Debt advice
Consolidating your debts could help you take control of your money. Depending on the interest rate and how long you take to repay, you could end up paying more in total. Think about the overall cost when making your decision.
If you're getting a secured homeowner loan to pay off unsecured debts, think carefully. It might not be the best choice. Missing payments could mean losing your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured on it.
There are many debt management support services and advice lines who can help you for free. Gov.uk has a list of services where you can get help in person, over the phone or online.
They can help you with your finances and spending habits by giving you independent advice on dealing with debt problems and debt management.
For secured loans Co-op Insurance Services Limited acts as an introducer to Clearscore. We are not the mortgage intermediary or lender. Co-op Insurance receives commission from ClearScore if you take out a secured loan. The amount of commission is a percentage of the overall amount you borrow.
For unsecured loans Co-op Insurance Services Limited acts as a Credit Broker not a Lender. If you take out an unsecured loan or are introduced to a third-party provider, we will receive a fixed percentage commission from Aro.
This will not impact the amount you pay back. Lenders terms and conditions apply. UK residents 18 and over.