TL;DR
Debt consolidation in the UK - key points
Debt consolidation through Extend Finance is only for clients who own property in the UK. It is most commonly arranged through a remortgage, additional borrowing or a second charge mortgage.
Consolidation uses new borrowing to repay selected existing debts, such as credit cards, personal loans or overdrafts. These debts may then become secured against your property. With a second charge mortgage, you still repay your existing mortgage separately.
A lower monthly payment does not always mean a lower total cost. If the debt is spread over a longer period, you may pay more interest, and missed payments on secured borrowing can put the property at risk.
IMPORTANT
Debt consolidation services offered by Extend Finance are only for clients who own property in the UK.
Consolidation is arranged through:
- remortgage
- additional borrowing
- second charge mortgage
If you do not own property, need a small personal loan, funds for renovation, unsecured finance, a car loan or payday loan, this page does not cover those products.
What is debt consolidation?
Debt consolidation means combining several commitments into one repayment. For property owners, it may be arranged through remortgage, additional borrowing or a second charge mortgage. A second charge consolidates the selected debts while your existing mortgage repayments continue separately.
If previous unsecured debts are moved into borrowing secured against a property, financial risk increases because missed payments can lead to the loss of your home.
More about changing your mortgage is available on the remortgage in the UK page, and wider mortgage context is available in mortgage services.
What debt consolidation options are there?
Remortgage
Replacing your current mortgage and raising additional funds to repay debts. The bank will assess income, credit history, loan-to-value, purpose of funds and total debt level.
Additional borrowing
Extra funds from your current lender. It may be simpler than a full remortgage, but still requires affordability and cost assessment.
Second charge mortgage
A second loan secured against the property. It may be considered when your current mortgage has good terms or a high early repayment charge, but it increases borrowing secured on your home.
Unsecured Consolidation Loan
An unsecured loan can combine debts without securing them on property, but Extend Finance does not provide unsecured debt consolidation services described on this page. This card is included only to explain the difference between solutions.
Does owning a property make me eligible?
Ownership alone is not enough. Equity is your property’s value minus the borrowing secured against it. Loan-to-value (LTV) expresses borrowing as a percentage of the property’s value. The lender assesses available equity, affordability and credit history; the amount available depends on its criteria and your circumstances.
Risks
What should you watch out for with consolidation?
When debt consolidation is arranged through a mortgage, remortgage or second charge, some previous unsecured debts may be moved onto borrowing secured against your property. This increases risk because missed payments on secured borrowing can lead to the loss of your home.
Lower payment does not mean lower cost
Extending the repayment period may reduce the monthly payment, but increase the total amount of interest.
Securing debt on your home
If consolidation is arranged through a mortgage, remortgage or second charge, previous unsecured debts may become secured against the property.
Effect on affordability
The bank will assess current commitments, credit history, missed payments, debt level and income stability.
Risk of borrowing again
Consolidation does not solve the problem if credit cards or loans are paid off and then used again.
What may a lender refuse to accept for consolidation?
Not every type of debt will be accepted by a lender. A bank may refuse consolidation or ask for more explanation if the debts relate to gambling, regular payday loans, recent missed payments, uncontrolled credit card use, business debts, tax arrears or other commitments that suggest higher risk.
Gambling transactions
Gambling-related debts or transactions may lead to additional affordability checks or a declined application. Criteria differ by lender.
Payday loans
Regular payday loan use can significantly reduce the number of available lenders.
Recent credit problems
Missed payments, defaults or CCJs can limit available options.
Business debts and tax arrears
Not every lender will accept consolidation of business debts or tax arrears.
If the credit report shows missed payments, defaults or CCJs, it may help to review the poor credit mortgage guide first. With every application, the lender will also assess credit history and current affordability.
When can debt consolidation make sense?
Consolidation may be considered when a client has several commitments, high monthly payments, stable income and a realistic plan to avoid further borrowing. It may also be reviewed during a remortgage if the client wants to organise finances and compare a new mortgage product at the same time.
It is not suitable for everyone. If the issue is day-to-day budgeting, gambling, addiction, lack of spending control or regular use of new credit limits, free debt advice should be considered first.
Before applying, check affordability, current commitments, total cost and whether securing previous debts on your home is sensible in your situation.
Which costs should I compare?
Compare the total amount repayable, repayment term and any early repayment, lender, broker, valuation or legal fees that apply. Fees added to the borrowing also attract interest. With a remortgage, compare the cost of the whole replacement mortgage, not just the extra borrowing. Ask for a written breakdown before deciding. Our mortgage broker fee, payment timing and any refund conditions are set out in the fee documentation for your individual case. The first consultation is free and without obligation.
Need independent help?
If the problem relates to current debt repayments or your financial situation needs independent help, it is worth using free debt advice.
Frequently asked questions
Will debt consolidation reduce my monthly payments?
It may reduce monthly commitments, but it does not always reduce the total cost. If the debt is spread over a longer period, the total interest may be higher.
Can I consolidate debts through a remortgage?
It may be possible to replace your current mortgage with a larger one and use the extra funds to repay existing debts. The lender will assess affordability, credit history, the value of your property and the borrowing as a proportion of that value. Compare fees and total interest as well as the monthly payment: debts previously unsecured would become secured against your home.
Is debt consolidation risky?
It can be. When debt consolidation is arranged through a mortgage, remortgage or second charge, some previous unsecured debts may be moved onto borrowing secured against your property. This increases risk because missed payments on secured borrowing can lead to the loss of your home.
Can a second charge mortgage be used for debt consolidation?
Sometimes. A second charge is a separate loan secured on your home alongside the existing mortgage, so you must be able to afford both repayments. Keeping the first mortgage may avoid changing a favourable deal, but the second loan has its own interest and fees. Compare the combined cost with remortgaging and other options; your home remains at risk if you cannot repay secured borrowing.
Does consolidation help with bad credit?
Consolidation does not erase missed payments, defaults or other accurate entries from your credit report. It may make repayments easier to manage, but existing credit problems can still restrict lender choice and increase costs. Before securing debts on your home, check that the new payment is sustainable and compare alternatives; free debt advice can help if you are already struggling to pay.
Can I keep using credit cards after consolidation?
Do not assume the cards will remain available: the lender or the consolidation arrangement may require particular accounts to be repaid or closed. If you borrow on the cards again, you could end up with new card balances as well as the mortgage debt used to clear the old ones. Plan a realistic budget before consolidating so ordinary spending does not depend on borrowing again.
Will a bank accept consolidation of gambling debts?
Lenders assess gambling-related debts and transactions under their own criteria. Such a case may be declined or require additional explanation, even if income appears sufficient. The decision depends on lender, account history, credit report and the overall situation.
Can I consolidate payday loans?
Sometimes it is possible, but regular payday loan use can significantly limit lender choice. The bank will want to understand why the loans were used and whether the financial situation is now stable.
Does consolidation mean a larger mortgage?
Yes. If consolidation is arranged through a mortgage, remortgage or second charge, borrowing secured on the property usually increases. Monthly payment, total cost, term and the risk of securing previous debts on the home must be compared.
Can I consolidate debts without owning a property?
Not through the solutions described on this page. Extend Finance helps with consolidation arranged through mortgage, remortgage or second charge mortgage, which requires property ownership.
Can I borrow £5,000 or £10,000 for renovation through consolidation?
This page describes consolidation of existing debts, rather than a personal loan offer for future renovation work. The solutions described require ownership of a property in the UK. Funding new renovation spending is a different borrowing purpose from repaying existing debts.