How to save money with debt consolidation 

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Managing Debt

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Team MONEYME|17 December 2024| 3-minute read

If you’re familiar with debt consolidation, then you might know it’s a way of streamlining your finances, by enabling you to roll multiple debts into one.  What you might not know, is that debt consolidation can help you save money. 

Depending on the arrangements, you can score a better interest rate, lower your monthly repayments, pay fewer fees, and be liable for less interest in the long run. 

What is debt consolidation? 

Before going deeper into the financial benefits of debt consolidation, let’s briefly recap what it is.  

Debt consolidation is an option if you’re repaying many debts. It involves bundling them together, so they’re transformed into one, single debt.  

You then repay this once per month – rather than juggling multiple repayment deadlines, amounts, fees and interest rates. Typically, you can get a better deal on your debt when you consolidate. 

Saving money with debt consolidation:  

Securing a lower interest rate 

In addition to helping you manage your finances more easily, debt consolidation can help you save money.  

An advantage of debt consolidation is the possibility of securing a lower interest rate.  

When shopping around for a loan provider, be sure to compare interest rates.  

At the same time, though, be aware of hidden fees – and read the fine print carefully. One convenient way to do this is looking at a loan’s comparison rate, which includes most fees and charges (such as the establishment fee and the monthly or annual account fee).  

Paying less interest overall 

As well as securing a lower interest rate, you might pay less interest overall when you consolidate your debts. 

Key to ensuring this is finding a debt consolidation loan that has both a lower interest rate and a shorter term.  

Before leaping ahead, check that you’ll save money by doing the maths. Calculate how much interest you’d pay on your current arrangements, were you to repay all debts, and how much you’d pay on a debt consolidation loan – then compare the two.  

Lower monthly repayments 

Another reason a lot of people consolidate their debt is to reduce their monthly financial monthly repayments, leaving more money in their pocket each month. 

You can generally do this by extending your loan term. This spreads the cost over a longer period, making it easier to manage in your budget. 

Whilst this can be good for short term cashflow, it may mean you pay more interest over the life of the loan, so it’s important to choose the loan term that aligns with your financial goals and budget. 

It could also be smart to choose a loan without any early exit fees. That way, if you repay it early, you’ll save on overall interest (without any additional costs).  

Fewer fees 

Another common benefit is fewer fees. When you have multiple debts, you usually pay fees on every account – either monthly or annually. Over years, these add up, plus, if you miss deadlines, you’re often liable for late fees.   

However, when you roll multiple debts into a debt consolidation loan, you pay fees on just one account, which can mean serious savings in the long run. 

Ready to consolidate (and save)?  

Want to check if debt consolidation might be right for you? We built a super simple debt consolidation calculator so you can see how much you could save, and what your repayments could look like. 

Try our free debt consolidation calculator here, it takes just a minute or so and it won’t impact your credit score.