Published: 10/01/2022

What is a debt consolidation loan?

At 1Plus1 guarantor loans we can offer unsecured debt consolidation loans. So, here we explain what a debt consolidation loan is. A debt consolidation loan lets you amalgamate debt payments – credit cards, store cards, overdrafts or loans – into one convenient payment. It can be a good option as it could reduce the total repayments you’re paying on any outstanding debts, though you could pay more in the long run.

They come in two forms secured and unsecured. Before offering you a loan for debt consolidation, as responsible lenders 1Plus1 will look at your outstanding debt and your credit history.

At a glance

  • Settle multiple debts in one manageable monthly repayment
  • Find a lower interest rate to reduce the total interest paid on outstanding debts
  • Regular, manageable repayments could help to improve your credit rating
  • A single loan can be easier to manage than several repayments made to different lenders

What can you use debt consolidation loans for?

You can use a debt consolidation loan to repay different types of debt:

  • credit cards
  • personal loans
  • store cards
  • overdrafts
  • payday loans
  • medical bills

How do debt consolidation loans work?

A debt consolidation loan means you can pay off multiple debts with lenders and focus on repaying one single debt consolidation loan.

Pros and cons of debt consolidation loans


  • Possibly reduce your monthly repayments by spreading the debt over a longer period with a fixed rate.
  • Potentially lower the interest you pay with a lower APR (annual percentage rate) – especially if some of your existing debts are high-interest agreements.
  • By making regular, manageable repayments improve your credit rating.


  • Missing payments on a debt consolidation loan will negatively affect your credit rating.
  • Potential savings may be cancelled out by additional fees and charges that are required to set up the loan or settle existing loans, so you could end up paying more. 1Plus1 do not charge any fees.
  • You may lose your home or car if you can’t keep up with the repayments on a secured loan.

What’s the difference between secured and unsecured debt consolidation loans?

You put up an asset, such as your home or car, for a secured loan as collateral against the money you’ve borrowed. Miss your repayments and your home or car could be repossessed.

Your assets are not at risk if you fail to make repayments on an unsecured loan.

Using your property as security may increase the chances of acceptance and you might get a lower rate of interest than you would with an unsecured loan – but it’s riskier.

Can I get a debt consolidation loan if I have bad credit?

It’s possible to get a debt consolidation loan if you have bad credit score or a poor credit history. At 1Plus1 you won’t be automatically discounted because of a bad credit history. Arguably having just one monthly payment can be easier to manage than owing several amounts to different lenders.

How many loans can I consolidate?

You can pool into your debt consolidation loan as many as you wish. They may come in a variety of forms, like credit card debt, loan debt, a bank account overdraft and so on. In terms of how much debt you can consolidate, this will be determined as part of your application and yours and your guarantor’s creditworthiness.

Are there alternatives to a debt consolidation loan?

Rather than specific debt consolidation loan, you could get a personal loan or secured loan. You could use a 0% balance transfer card to consolidate your credit card debts into one card.. Beware that you’ll need to keep up with a minimum repayment amount. If you don’t, you’ll probably lose your 0% rate and pay far more. There are various other limits and conditions you’ll need to meet, which mean they might not suit your needs.

Debt consolidation right for you?

Before taking a consolidation loan, make sure it’s the right for you or, you may end up in a worse situation than before.
You should consider the worst-case scenario. A debt consolidation loan should be the last course of action for many.

Consider other options if:

  • you won’t cover all your existing debts
  • your existing debts are close to settlement
  • the fees for the new loan or paying off your old ones outweigh the benefit of taking out a new loan
  • you can't afford to keep up the new monthly repayments for the length of the loan.

Ultimately, the decision is yours. You must weigh up the pros and cons.

1Plus1 offer personal loans backed by a guarantor, subject to both the borrower and guarantor meeting our affordability and credit worthiness criteria.

If you think you may be interested in a 1Plus1 Loan, please give us a call on 0330 1200 313 and one of our friendly staff will be more than happy to discuss the process with you, or start your application here.