It depends which number you mean. Consolidating £20,000 of credit cards and a personal loan with a secured loan (also called a homeowner loan or second charge mortgage) or a remortgage usually cuts your monthly outgoings substantially, because the rate is lower and the term is longer. But because the debt is spread over 15 or 20 years, the total repaid is usually higher than staying put, so the monthly saving and the lifetime cost point in opposite directions.
- Consolidation usually reduces your monthly payment, often substantially, because the rate is lower and the term is longer.
- The total repaid over the new term is often higher than carrying on, because interest runs for many more years.
- A shorter term reduces the total cost sharply while still cutting the monthly figure compared with cards and loans.
- Fees for valuation, legal work, the lender and the broker add to the cost and should be included in any comparison.
- Both routes are secured on your home, which may be repossessed if you do not keep up the repayments.
What is the honest way to measure a saving?
Adverts for consolidation tend to lead with the monthly figure, because it is the number that looks best. It is a real number and it matters: if what goes out each month on cards and a loan is squeezing everything else, bringing it down changes daily life. But it is only half the picture.
The other half is the total you repay before the debt is gone. Credit card minimum payments can run for decades, but a personal loan over five years would be finished in five years. Move the same balance onto a 15-year secured loan or a 20-year remortgage and you pay a lower rate for a much longer time, and the longer time usually wins. Comparing the two properly means asking two questions: what will I pay each month, and what will I have paid in total by the end?
There is a third question worth adding: what is my current debt actually costing me? If you are paying only minimum payments on cards, the honest comparison is not with today's payment, because that figure would fall slowly as the balances reduced, but the interest cost of that route over its full life is often far higher than either consolidation option. Our debt consolidation calculator runs your own figures across all three questions.
What does the standard example look like for both routes?
The figures below use fixed illustrative rates so that the two routes can be compared like for like. They are not offers, and your own rate will depend on your circumstances.
Illustrative rates: The rates in this example are fictional and used only to show how the numbers work. They are not an offer. Your actual rate may be lower or higher and will depend on your circumstances, your property and the lender. Consolidating debt over a longer term can mean you pay more interest overall, even if your monthly payment falls.
| Line | Secured loan | Remortgage |
|---|---|---|
| Current monthly payments (£12,000 of cards at 24.9%, £8,000 loan at 12.9% over 5 years) | £532/month | £532/month |
| New monthly payment (£20,000 at 7.9% over 15 years, or at 5.4% over 20 years) | £190/month | £136/month |
| Total repayable over the new term | £34,196 | £32,748 |
On the monthly line, the secured loan saves £342 a month and the remortgage saves £396. On the total line, both routes repay considerably more than the £20,000 borrowed: £14,196 more on the secured loan and £12,748 more on the remortgage. The remortgage looks cheaper on both lines here, but that ignores any early repayment charge on your existing mortgage deal and the cost of moving your whole mortgage onto a new rate, which is why the comparison is often closer in practice. Our secured loan vs remortgage comparison works through those extra factors.
When does consolidating cost more than staying put?
Quite often, if you measure by total cost, and it is important to say so. Take the £8,000 personal loan in the example. It has five years left, so it would be cleared in 2031. Roll it into a 15-year secured loan and that £8,000 share of the borrowing runs for a decade longer at a lower rate, which in total costs more interest, not less. The cards are different: on minimum payments they would typically take far longer than 15 years to clear.
So consolidation tends to save total money on expensive, slow-moving debt, and lose money on cheap or nearly finished debt. Interest-free balances, 0% cards and loans with a year or two to run are usually better left alone. Fees tip the balance further: a typical consolidation case carries valuation, legal, lender and broker fees that can run to several thousand pounds. See our guide on what broker fees are normal.
Consolidation also costs more if the cleared cards are used again. Then you carry the new secured loan and fresh unsecured debt together, and your home is at risk of repossession for a payment that no longer solves the problem. Free advice from MoneyHelper, StepChange or Citizens Advice can help you judge whether borrowing is the right fix or whether a budgeting or repayment plan would do the job without adding secured debt.
How does the term change the monthly saving and the total cost?
The term is the lever that moves both numbers at once, in opposite directions. The same £20,000 secured loan at the illustrative rate over different terms shows the effect.
Illustrative rates: The rates in this example are fictional and used only to show how the numbers work. They are not an offer. Your actual rate may be lower or higher and will depend on your circumstances, your property and the lender. Consolidating debt over a longer term can mean you pay more interest overall, even if your monthly payment falls.
| Term at 7.9% | Monthly payment | Total repayable |
|---|---|---|
| 10 years | £242/month | £28,992 |
| 15 years | £190/month | £34,196 |
| 20 years | £166/month | £39,851 |
Against the current £532 a month, even the 10-year term saves £290 a month, and it costs £10,859 less in total than the 20-year term. The extra £24 a month saved by stretching from 15 to 20 years costs £5,655 more overall. The practical rule is to choose the shortest term whose payment you can comfortably afford in a bad month, not the longest one a lender will allow. Overpaying later can shorten the term; our guide on paying off a secured loan early explains the usual limits. A qualified adviser will show you these figures for your own circumstances, and checking will not affect your credit score.
Consolidation is unlikely to save you anything if most of your debt is on 0% or low-rate agreements, or has less than two years to run, because you would be replacing cheap short debt with cheaper-per-month but far longer debt and paying more in total. It is also the wrong tool if the underlying problem is spending that exceeds income, since the cleared cards will fill up again and you will be left with both. And if you would only take the longest term to make the payment fit, the borrowing is probably too large for your budget and a free debt adviser should look at alternatives first.
Worried about debt? Get free advice first
If you're struggling, it's worth speaking to a free, impartial debt advice service before you borrow more. They don't sell anything and won't judge your situation.
- MoneyHelper: Free, impartial debt advice backed by government
- StepChange: The UK's largest free debt charity
- Citizens Advice: Free, confidential advice on debt and money
Checking your options with Equiclear will not affect your credit score.
Frequently asked questions
Will I definitely pay less each month by consolidating?
Usually, yes, because a secured loan or remortgage rate is typically lower than card and loan rates and the term is longer. The reduction depends on your rates, balances and the term you choose. A short term can produce a monthly payment close to what you pay now.
Why is the total cost higher if the rate is lower?
Because interest is charged for longer. A lower rate over 15 or 20 years can add up to more interest than a higher rate over five. The longer the term, the lower the monthly payment and the higher the total, which is why term choice matters as much as rate.
Is a remortgage always cheaper than a secured loan for consolidation?
Not always. A remortgage rate is usually lower, but if you are on a fixed deal the early repayment charge can wipe out that advantage, and moving your whole mortgage to a new rate may cost more than keeping it. A broker compares both for your circumstances.
How do fees affect the saving?
Valuation, legal, lender and broker fees add to the amount borrowed or are paid upfront, and if added to the loan they accrue interest for the full term. Always compare using the APRC and the total amount repayable, which include fees, rather than the headline rate.
Can I reduce the total cost after taking the loan?
Yes. Many lenders allow overpayments, often up to 10% of the balance a year, without penalty, and some charge nothing to repay in full after an initial period. Overpaying shortens the term and cuts the total interest, so check the early repayment terms before choosing a lender.