Debt consolidation: what to consider first

List each balance, interest rate, required repayment, remaining term and any account fees. Request current payout figures where needed, because a statement balance may not include interest or charges up to the settlement date. Include early repayment costs and overdue amounts.

For credit cards and other revolving accounts, record limits as well as balances. Decide how you will compare repayment periods: paying only minimum amounts can produce a very different outcome from maintaining a fixed repayment. Use assumptions you can explain rather than choosing whichever makes consolidation look best.

A replacement loan may lower the regular repayment by spreading debt over a longer period. That can ease immediate cash pressure while increasing interest paid overall. Compare establishment fees, ongoing charges, payout costs and total repayments across both options.

If a debt is close to being repaid, rolling it into a long new term deserves particular attention. Also check whether the new rate is fixed, variable or temporary. A lower starting rate is only one part of the decision, especially if fees or a longer repayment period offset the apparent saving.

The consolidation calculator in the calculators area can help compare estimated repayments and costs using the figures you enter. Include all relevant debts and the proposed new term, rate and fees where the tool allows. Check its assumptions and note any costs it does not model.

Try more than one scenario, including a shorter repayment period and maintaining your existing total payment if affordable. Calculator results are estimates, not evidence that a lender will approve the loan or that you will save money. Verify any proposed outcome against personalised written quotes and payout figures.

Moving unsecured debts into a loan secured by a car or property changes what may be at risk if repayments are missed. A lower interest rate does not cancel that trade-off. Ask what assets secure the loan and what default could mean under the agreement.

Be cautious about involving a guarantor or adding another borrower simply to obtain approval. Their obligations may be significant. Refinancing debts into a home loan can spread short-lived spending over many years unless there is a realistic plan to repay that portion sooner.

Consolidation does not address the reasons balances built up. If income remains below essential spending, a new loan may only postpone the next shortfall. Review the household budget and identify an affordable repayment before making an application.

Ask how old accounts will be paid and whether they must be closed or their limits reduced. Move recurring payments before closing an account and confirm any residual interest or fees. Leaving unused credit available can make it easier to accumulate new balances alongside the consolidation loan.

• Confirm settlement and account closure responsibilities.
• Update direct debits and repayment reminders.
• Keep a realistic buffer for irregular essential bills.

If you are already struggling, contact existing lenders about hardship assistance before assuming another loan is the only route. Free financial counselling is available through the National Debt Helpline. A financial counsellor can help you understand options without selling you a consolidation product.

Ask anyone proposing a solution about fees, commissions and consequences, and be cautious of guaranteed savings or pressure to act immediately. Debt consolidation is different from formal insolvency arrangements, which have separate consequences. Seek appropriate professional help if legal action, serious arrears or unmanageable debt is involved.