To find the best consolidation loans UK residents can get their hands on, you need a debt consolidation loan comparison guide. And that’s what our MoneyNerd team has been working hard on lately.

Read on to learn about the best consolidation loans from the top UK banks and building societies right now. 

*The information below is accurate at the time of writing

What Is a Debt Consolidation Loan?

Debt consolidation is when someone with multiple credit card, loans or other credit wants to consolidate all their debt into a single debt. To do this you may open up a new balance transfer credit card or even remortgage.

But the most popular method of debt consolidation is by getting a new loan to pay off all your debts, namely a debt consolidation loan.

You should only consolidate your debts if the repayment terms are cheaper on your new loan compared to all your current debts. You may have to pay back longer, but cutting your repayments each month is the aim. 

Who Offers Debt Consolidation Loans in the UK?

There are lots of banks and building societies that offer debt consolidation loans in the UK. Most of the time, they are advertised as personal loans. However, as they are allowed to be used for debt consolidation, they often take on the name as debt consolidation loans. 

We’ve been looking at these types of loans offered by eight of the UK’s biggest banks:

  • Santander
  • HSBC
  • NatWest
  • Halifax
  • Barclays
  • Lloyds
  • Royal Bank of Scotland
  • Nationwide

The Best Consolidation Loans UK

There is no best consolidation loan that everyone wanting one should choose. But there could be a best consolidation loan in the UK in relation to your personal situation. To help you find which loans may be ideal for you, we have divided our research into different categories:

The Best Consolidation Loan for Eligibility 

Before you even get to credit checks, some things can stop you from applying for a debt consolidation loan with the big UK banks. 

At the time of writing, only Santander require applicants to be at least 21 years old. All of the other banks mentioned above only need applicants to be 18 years old. But this won’t be the biggest problem.

The biggest hurdle preventing people from applying to many banks is that they are not already customers of the bank they want a loan from. For example, Nationwide, NatWest, Barclays, Lloyds and RBS all need applicants to hold one of their bank accounts to apply for their debt consolidation loans. 

And in many cases, they need you to have opened this account one to three months ago, so you can’t just quickly open an account and then apply for their personal loan.

But some banks allow applications form non-customers, namely Santander, Halifax and HSBC. 

Winners: Santander, HSBC and Halifax

Losers: Nationwide, NatWest, Barclays, Lloyds and RBS

The Best Consolidation Loan APR Rates

The APR rates you see advertised on bank websites should be taken with a pinch of salt. Most of the time, they highlight the best-case scenarios and few people can get loans with such low APR rates. 

Nevertheless, looking at this rate and the maximum APR rate they will charge gives a decent indication of how much interest you might need to pay.

The lowest representative APR rates are found at Nationwide, Santander, HSBC and Halifax – 2.9%, 3%, 3.3% and 3.45%, respectively. These are the rates usually for loan amounts between £7,500 and £15,000.

All of the other banks listed earlier have a representative rate of 3.9%, except for Lloyds. Their best offering was a harsher 5.5%.

Most of these banks maximum APR rate is 29.9%, although Santander and Nationwide cap their APR at 24.9%. And the best of them all is found at HSBC. The most interest you pay with their loan is 21.9%!

Winners: Santander, HSBC, Nationwide

Losers: Most of the rest 

The Best Consolidation Loan for Repayment Holidays

Repayment holidays may be possible in difficult circumstances with any bank, but these are usually judged on a case-by-case basis. 

However, some UK banks promote repayment holidays as part of their loans. You will need to be accepted for the repayment holiday, but if you are, they can really help you manage your loan repayment from the start. 

The three UK banks that currently promote potential repayment holidays are RBS and NatWest. Both of these banks state that some customers will be able to start the first three months of their loan without having to pay anything. 

But the real winner here is Lloyds. People who have a loan with Lloyds may be able to access two repayment holidays every year that they have a loan. This is a fantastic safety net and a great way to help people manage their repayments in line with the unforeseen events of real life. 

Winners: Lloyds, RBS and NatWest

Losers: All the rest!

The Best Consolidation Loan for Early Settlement 

Early settlement is when you pay off your loan early. Most banks do allow this but you will have to pay additional fees to clear the loan before it is due. For example, to clear a Lloyds personal loan you will have to pay as many as 58 days of interest. Barclays is slightly better as you only have to pay a maximum of 30 days of interest. 

But there is one bank that excels the rest in this department. HSBC claim that you can clear a personal loan with them for free at any time. 

Winner: HSBC

Losers: The rest!

Our Overall Top Pick!

Our overall top pick for the best debt consolidation loan UK residents can find right now is HSBC. They don’t require you to be a customer, offer free loan settlement and have a much lower maximum APR rate. Lloyds is also worth considering because of those repayment holidays each year. 

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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