Once you’ve decided to consolidate your debts, you’ll probably be eager to get it done. After all, debt consolidation can make budgeting easier and reduce your monthly repayments. If you want to know more about debt consolidation loans with an instant decision and where to find them – keep scrolling here. 

Debt consolidation – quick recap!

Debt consolidation is when you move all your existing debt into one place with one lender. Instead of having to manage multiple creditors chasing you for a monthly repayment, you’ll now just have to make one fixed monthly payment to one creditor. This isn’t the only benefit, as will be discussed later. 

So, how does it work in practice? Debt consolidation requires the debtor to take out a new form of credit, which can be either a credit card, remortgaging or the most common method – to apply for a loan amount of the value of all existing debts. For example, you could apply for a debt consolidation personal loan to pay off other personal loans, credit cards, store cards and more. It’s important to make sure the new debt consolidation loan has an equal or better interest rate than the interest rates you are currently paying. 

Find your best debt solution

This 4 question debt calculator will tell you if you’re eligible.

What is the total amount of your debt?

What is a debt consolidation loan?

Debt consolidation loans are a type of personal loan that is exclusively used to pay off other debts. The length of the loan term can vary depending on the lender but is most often capped at 60 months. 

Some people just use a generic personal loan to consolidate their credit. In any case, the loan should equal the total amount needed to pay back existing credit and you should only apply for one of these personal loans from a lender that is authorised and regulated by the Financial Conduct Authority. 

Debt consolidation loans are also advertised with an APR representative example. The representative APR is the annual rate of interest and fees that 51% of applicants received, and it’s usually included on any loan calculator. The rate you are offered – if approved – could be higher or lower than this representative rate based on your personal circumstances.  

Alternative methods of debt consolidation include:

  1. Balance transfer credit cards
  2. Secured consolidation loans (remortgaging and second charge loans)
  3. Some debt solutions, including a Debt Management Plan

The benefits of debt consolidation loans

Using a debt consolidation loan could provide an array of benefits, namely:

  1. The new loan will make you responsible for one monthly payment only. This single monthly repayment is easier to stay on top of and mitigates any chance of creating more debt problems, and subsequently protects your credit score. It’s a fantastic way to take control of your finances once again.
  2. You may be able to access a better interest rate which would make future monthly repayments cheaper than your current cumulative monthly repayments. 
  3. They are widely available and some debt consolidation loans come with an instant decision

How hard is it to get approved for a debt consolidation loan?

When you apply for an unsecured debt consolidation loan, the lender is responsible for ensuring you will be able to pay your monthly payments. They do this by assessing personal circumstances such as your income, and by checking your credit score. 

Lenders want to give their money to people who have a track record of managing credit repayments well. If you have a poor credit score, you may be rejected for a debt consolidation loan. However, due to the nature and use of these loans, there are many lenders that advertise their debt consolidation loans for people with bad credit. 

If you have a poor credit score, you may still get approved but the interest rate offered may be higher than expected, i.e., a lot higher than the representative example. 

How long does it take for a debt consolidation loan to be approved?

Thanks to automated technologies and fast credit checks, most people can get a decision on their debt consolidation loan fast. Some companies can provide an instant decision or within just a few minutes. This is even more likely if you apply to a bank where you’re already a customer with a bank account. 

On other occasions, it can take a few days, especially if additional checks are needed or the lender requests further information about your income. 

Debt consolidation loans with an instant decision

Here are some examples of consolidation loan providers that claim to give an instant decision on applications. They’ve been included for this reason only and are not necessarily the best option available: 

  1. Bamboo Loans

Bamboo Loans offer these loans up to £8,000 and have a service that provides you with an immediate quote without checking your credit rating. This can be beneficial for those window shopping, but remember the quote is not guaranteed.

  1. Post Office

The Post Office has a similar service that will instantly tell you how likely you are to be approved and they also won’t leave a mark on your credit score. The actual application decision is instant in most cases. 

  1. Pegasus

Pegasus is an online lender that promises instantaneous decisions for most applicants. They also claim to put the money in your account within 60 minutes. Their online reviews are exceptional at the time of writing. 

  1. Zopa

Zopa claims to offer a personalised quote on your application within just three minutes. Their representative rate is currently 15.4% and credit is available between £1,000 and £25,000. They also have good online reviews.  

  1. Your bank

Because your bank already has lots of financial information on you, they can make decisions swiftly. And the money is likely to be received faster as well. Check to see if your bank offers debt consolidation loans with an instant decision. 

How long does it take to get the money?

Once you have received a decision – hopefully a quick one – you will be offered the loan at a personalised interest rate. You’ll then need to read the terms and conditions of the credit agreement, and if satisfied you may need to sign it and send it back. You’ll also need to supply the lender with your bank account details if not already done within the initial application. 

Some lenders claim to put the money in your bank the same day or within the same hour. Again, this is more likely if you bank with the provider of the loan. On weekends or bank holidays, the process could take a couple of days. It all depends on your new loan provider. 

Will I qualify for a debt consolidation loan?

The FCA allows each lender to make their own assessment of your ability to repay the full loan amount over monthly payments. The decision is an entirely personalised one, so there is no way of knowing for sure if you will be approved for a debt consolidation loan. This also means that one lender could reject you and another could accept you.

Don’t think this gives you a free pass to apply everywhere. Doing so could affect your credit score in a bad way.

If you cannot get one of these loans, you should consider a Debt Management Plan (DMP) or another debt solution. A DMP is a bit like consolidating debts but without the need to apply for more credit. 

Will my bank give me a consolidation loan with bad credit?

Banks are unlikely to award one of these loans to people with bad credit, even if you already bank with them. Most “bad credit debt consolidation loans” are advertised by online lenders rather than high-street UK banks. 

Consolidation loan advice for individual circumstances

Knowing what to do and where to apply can be difficult. But it is made easier with free debt advice from a charity registered in England, Wales and Scotland. 

We’re talking about Step Change and National Debtline, two amazing charities that are providing tailored advice to people with debts. Contact them for support, today! 

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
×