Originally published 2 May 2017. Substantially reviewed on 3 November 2026.
Information checked: 3 November 2026.
Reducing a loan’s cost means comparing the total amount still payable, not just finding a smaller monthly instalment. Before overpaying or refinancing, get a current settlement figure and check that essential household bills remain affordable.
Start with the existing agreement
List the balance, interest rate, remaining payments and any early-settlement charges. Ask the lender what a partial overpayment would change: the monthly payment, the end date or both. Use its repayment instructions rather than sending an unexplained extra payment.
Compare the settlement figure with the sum of the remaining instalments. The difference gives you a starting point for assessing a saving, but include any new borrowing fees before deciding.
Should you use savings?
Paying costly debt can save interest, but emptying your account can leave you borrowing again when a bill arrives. Keep enough for imminent essentials and a realistic buffer. Deal with priority arrears and their consequences before ranking debts only by interest rate. MoneyHelper’s borrowing guide explains why the whole budget matters.
Compare a replacement loan carefully
A lower interest rate does not guarantee a lower total cost if you extend repayment over more years. Compare the actual offer, fees, total repayable and affordability. A representative advertised rate is not a promise that you will receive it.
For example, a hypothetical £150 payment for 36 months totals £5,400, while £100 for 60 months totals £6,000. The smaller instalment costs more overall before any additional fees. This is an illustration, not a loan quote.
Consolidation is not always secured
A consolidation loan can be secured or unsecured. Securing previously unsecured debts against your home changes the risk: missed payments could put the property at risk. Even an unsecured consolidation can cost more if the term is longer or fees outweigh the interest saving.
Read MoneyHelper’s consolidation guidance. Consider how you will avoid building up fresh balances on the accounts you repay. If payments are already unaffordable, seek free debt advice before adding another loan.
Understand card transfers
A balance transfer usually moves card debt; a money transfer sends money to a bank account. They are not interchangeable. Check eligibility, transfer fees, the promotional period and the rate afterwards. A cash withdrawal can have different charges and should not be mistaken for a promotional money transfer.
Do not rely on an automatic PPI refund
Older versions of this article suggested discovering PPI entitled you to a refund. That was misleading. The general complaint deadline was 29 August 2019, with limited exceptions. Check the FCA’s current PPI guidance rather than treating a refund as money available to repay a loan.
If you are struggling
Contact the lender before missing a payment where possible. Explain what you can afford and ask about support. Do not cancel payments without understanding the consequences. An independent debt adviser can help compare options without requiring you to take new credit.
