Will debt consolidation freeze my interest?

8 May2021

You can consolidate unsecured debts in a number of different ways. You may use a 0% interest credit card, a debt consolidation loan or a debt management plan. These methods work in different ways to help people in different situations - and not all of them can freeze interest on your unsecured debts.

What kinds of debt consolidation can freeze interest?

Debt consolidation with a credit card

This involves finding a credit card that has an introductory period with 0% interest. This can be useful for consolidating your unsecured debts - predominantly credit card debts - although there will be a balance transfer fee to consider.

Move all your different debts with varying interest rates onto the card, where they will all stop accruing interest. As long as you make the minimum payment each month, you can pay your debt off as quickly or as slowly as you like. If you pay more every month, the debt will be paid off quicker - and if you can pay it all off before the 0% period runs out, you won't pay any more interest on this debt at all!

It's important to remember that if you still have money on the card after the interest-free period ends, it will begin to generate interest again. You may therefore wish to move the balance from the card before the interest-free period ends if you can't repay it in time. Remember that it's not guaranteed that you will be able to get another interest-free card, as you will need a good credit rating, so be careful.

Want to know more about debt consolidation with a credit card? Click here.

Debt management

Debt management plans are not guaranteed to freeze interest on your unsecured debts - but they can do.

Debt management works by striking up an informal agreement with your lenders which allows you to make smaller repayments towards your debts every month, since you can't afford your original payments.

These will usually be made over a longer period of time. Interest can often be frozen if you (or a debt management company acting on your behalf) ask the lenders to freeze any interest and charges on the debts. It's important to note that your lenders are not obliged to agree to freeze your interest - or to accept the debt management plan at all. If they do freeze your interest, however, this should make it easier to repay your debts.

If your lenders don't agree to freeze interest, then paying back debts over a longer amount of time may mean you pay more overall. Debt management will also negatively affect your credit rating.

If you are interested in knowing more about debt management, click here.

When doesn't debt consolidation freeze interest?

Debt consolidation loans

The idea behind debt consolidation loans is to take out a loan that's big enough to repay all your current unsecured debts at once. This usually makes the repayment process easier by combining several different debts into one.

Although interest won't be frozen by a debt consolidation loan, it can be beneficial to replace many different debts with varying interest rates with just one loan - hopefully, with a significantly lower interest rate. Just bear in mind that repaying that loan more slowly than the original debts could still cost more in interest in the long run, even if the rate is lower.

Use our Solution Finder to see which debt solution could be right for you .

Try our debt solution finder

Answer a few simple questions and find out which debt solutions could help you, based on your circumstances.

Your Situation

Your Details

Please remember, this is just an information tool. We would always recommend you speak to a debt advisor for the most appropriate way to resolve your debt problems.
We'll give you an on-screen recommendation and call you. One of our advisors will be in touch to answer any questions you may have about your results.
Your privacy is important to us. All correspondence is held in the strictest confidence and we will only request information required to find your debt solution.

Related resources

Tags: debt debt consolidation, debt management, debt solution, interest rates, credit cards, credit rating, loans

Fees payable when continuing service is provided. Repaying debt over a longer period may increase the total amount to be repaid. Calls are recorded and are usually free from UK landlines. Mobile phone users may be charged and should check with their service provider. Cards are provided by third parties and are subject to eligibility, status and terms and conditions. Applicants must be UK residents aged 18 or over.

All About Money Limited © 2013. All rights reserved. 42 Boston Rd, Sleaford, Lincolnshire NG34 7ER.