Debt Consolidation Calculator

The Promise and the Trap

Debt consolidation — taking out a single new loan to pay off multiple existing debts — can be a smart move if you have high-interest credit cards or store cards and can qualify for a lower-rate personal loan. The appeal is obvious: one monthly payment instead of several, a lower interest rate, and a clear end date. But consolidation has a dark side: if you consolidate and then run up the credit cards again, you end up deeper in debt than before.

This calculator shows you the honest math: the monthly relief (how much less you pay each month), the total cost (whether the new loan costs more or less over the full term), and the total saving (or cost). A lower monthly payment over a longer term can actually cost you more in total interest, even though it feels like relief. Always look at the total cost, not just the monthly payment.

When Consolidation Works

• You have credit card debt at 20-30% APR and can get a personal loan at 8-12%.
• You're committed to not using the credit cards again (cut them up or freeze them).
• The total cost of the new loan is lower than the total cost of the existing debts.
• You can afford the new monthly payment comfortably.

When It's a Trap

Consolidation becomes a trap when you clear the credit cards, keep them open, and start using them again. Within 12-18 months, the cards are maxed out again AND you have the consolidation loan to pay. You're now deeper in debt than when you started. The fix: if you consolidate, close the credit card accounts. Don't keep them "for emergencies" — that's how the cycle starts.

What Borrowing Actually Costs in Late 2026

The maths above only works because of the gap between card rates and loan rates, and right now that gap is historically wide. The Bank of England held Bank Rate at 3.75% through its September 2026 meeting, and major-bank headline pricing on loans of £7,500 to £25,000 sits around 6-8% representative APR — Bank of Scotland, for example, advertises 7.4% representative on that band (from 6.1%). Smaller loans price higher: sub-£5,000 borrowing is the expensive tier.

On the other side of the ledger, the average advertised credit card purchase APR reached 35.8% in early 2026 — the highest since Moneyfacts' records began in 2006 — and the cards most people actually carry charge 20-30%. That is the spread consolidation exploits: £10,000 of card debt at 29.9% accrues roughly £2,990 of interest a year before repayments shrink the balance, while the same balance at a 7.9% loan rate accrues about £790.

Two fine points on loan pricing. First, "representative APR" only has to be offered to 51% of accepted applicants — under FCA rules nearly half of successful applicants can be quoted a higher rate, so your actual offer depends on your credit file, income and outgoings. Use a soft-search eligibility checker (it leaves no mark on your credit file) before applying formally, because a declined application leaves a hard search other lenders can see. Second, most UK personal loans charge no arrangement fee — the APR is the real cost. The expensive lever is the term: at 9.5% APR, stretching £15,000 from 3 years to 5 years cuts the monthly payment from about £481 to £315 but adds roughly £1,600 in total interest.

The Cheaper Alternative: 0% Balance and Money Transfer Cards

If your problem is purely credit card debt, a 0% balance transfer card usually beats a consolidation loan on price. The balance moves to a new card charging no interest for a promotional window — in mid-2026 the longest offer ran to 38 months interest-free — with a transfer fee typically around 2-3% of the amount moved. Fee-free transfers exist but with much shorter windows: roughly 14 months at the top end in late 2026.

For overdrafts and small loans, the cousin product is a money transfer card: it pays cash into your current account at 0% for a set period, for a fee of roughly 3-4% on the amount moved. Both routes share the same catches: headline offers go to applicants with clean credit files, balances usually must be transferred within the first 60-90 days of opening the account, and when the window closes the rate jumps to the card's standard APR — typically well over 20%. A personal loan's fixed payment and guaranteed end date is the calmer structure if you know you will not clear the balance inside the 0% period. Compare both on total cost over the time you will realistically take to repay, fees included.

When Free Help Beats Any Loan

Consolidation is a product for people who can repay. If you cannot see a realistic path to clearing what you owe within about five years — at a rate you can actually qualify for — borrow nothing new and talk to a free debt adviser first. StepChange, National Debtline, Citizens Advice and Christians Against Poverty all advise for free; anyone cold-calling to "write off 80% of your debt" for a fee is selling you something. While you decide, the Breathing Space scheme (the Debt Respite Scheme) gives a 60-day legal freeze on interest, charges and enforcement — with an open-ended version for people receiving mental health crisis treatment — arranged only through free advisers.

The formal ladder, in brief: a Debt Management Plan is informal — you repay at a rate you can afford and creditors are asked, not compelled, to freeze interest. A Debt Relief Order covers qualifying debts of £50,000 or less if you hold £2,000 or less in assets and have £75 or less spare each month; it is free to apply, lasts 12 months, and the covered debts are then written off. An Individual Voluntary Arrangement becomes binding when creditors holding 75% of the debt agree; an insolvency practitioner sets the term — commonly five to six years — and charges a set-up fee plus handling fees on each payment. Bankruptcy costs £680 to apply for in England and Wales and carries no minimum debt level. Our UK Debt Consolidation guide covers each in detail, including what they do to your credit file.

Debts You Should Never Roll In

Three categories resist consolidation. UK student loans first: repayment is income-contingent — you pay 9% of income above your plan's threshold (6% for postgraduate loans), pay nothing in months when income drops below it, and any remaining balance is written off after 30-40 years depending on the plan. A private consolidation loan converts that safety valve into a hard monthly bill owed whatever your income.

Second, never convert unsecured debt into secured debt. A second-charge loan or a remortgage used to clear card balances puts your home behind debt that previously carried no repossession risk. Third, be careful with very old debts: in England and Wales a debt usually becomes statute-barred — unenforceable in court — six years after the last payment or written acknowledgement (five years in Scotland), and a token payment can restart that clock. And consolidation quietly removes a protection worth knowing: under Section 75 of the Consumer Credit Act, card purchases of £100.01 to £30,000 make the card issuer jointly liable with the retailer. Once that balance sits in a personal loan, the protection is gone.

Before You Apply — a Five-Point Checklist

• Run the numbers twice: monthly relief and total cost over the full term. This calculator shows both — the second figure is the one that protects you.
• Check your credit reports for errors and old addresses before a lender reads them.
• Use soft-search eligibility checkers to shortlist realistic rates; never scatter formal applications.
• Price a 0% balance transfer or money transfer card against the loan on total cost over your realistic repayment time, fees included.
• Decide what happens to the cleared cards — closed, cut up, or frozen — before the loan lands. If no version of the numbers works, call a free adviser instead of a lender.

Related Tools

• Debt Consolidation Guide UK — the full guide: 0% balance transfers, DMPs, DROs, IVAs and your legal protections.
• Personal Loan Calculator — see the repayment on a consolidation loan.
• Credit Card Minimum Payment — see what paying minimums on the old cards would really cost.
• Early Repayment Calculator — what settling the new loan early actually saves.
• Budget Calculator — find money to pay off debt faster.