Consolidating multiple loans and credit cards into one unsecured personal loan or card could help you understand what your debt costs and make your repayments easier to manage. It could also be the first step in a plan to help you set an end date for your debt.

Whether debt consolidation is right for you depends on a number of things – and keep in mind there are various ways to consolidate debt, including balance transfers.  Here we’ll explore a few situations in which consolidating your debts into an unsecured personal loan might help you.

If it could be less costly than the alternative

Three credit cards, a car loan, a holiday loan and an overdraft on one bank account. Seems like a lot written out, doesn’t it?

If you have a few different kinds of debt, take a moment to figure out how much they’re costing you. What interest rate do you pay on each loan and card? How long would it take to pay each of them off? How much interest are you likely to pay on each debt over its term? How much are you paying overall in fees such as monthly fees?

Once you’ve taken stock of the interest rate, term and fees on your existing debts, understand what offers are available and complete the same calculations if you were to consolidate your debts. Would the new repayment amount fit in with your budget? Will you pay less in fees? Consider all of these factors to determine whether it would be financially worthwhile to consolidate.

When you’re comparing how much interest you’ll pay over the life of the consolidated loan against your existing debts, remember to take into account the loan term. Even if the new interest rate is lower, you may end up paying more interest over the life of the new loan if its term is longer than the time you have left on your existing loans. Also remember to check break costs and early repayment fees on your existing debts.

If you ever find yourself struggling to make card or loan repayments, contact your bank to determine what options are available for you.

If you want to simplify your repayments

Repayments can quickly become complex to manage when you have many forms of debt with different repayment amounts, fees and interest rates. Consolidation could streamline your repayments into one loan or card with a single payment schedule and interest rate.

With one debt to manage rather than many, you may be better placed to manage your repayments and focus on setting an end date for your loan. Remember to close any loans and credit cards with other banks when you consolidate them into a new debt.

If you want to get rid of your cards

With multiple credit cards, you’re likely paying multiple sets of fees, and you may be actively spending on all of them, incurring different interest rates. This may suit you if you’re meeting repayments and happily earning rewards points. But if you’re trying to maintain a strict budget to focus on saving or just simplifying your spending, cancelling your existing loans debts and consolidating the total balance into a single personal loan could help you focus on paying your debt down.

If you think debt consolidation is the right move, here are four questions to ask yourself before you apply.

You can read more about our unsecured personal loans here.