How many you have, how recent they are and whether they are settled all shape whether wider consolidation is straightforward, needs certain accounts cleared first, or is not the best route for now.
This page covers consolidating cards, loans or other debts when defaults sit on your file, rather than raising money specifically to pay off the defaults themselves. For that, see paying off defaults through a remortgage. Our debt consolidation remortgage page covers the basics and the risk of securing debt on your home.
On this page
This page covers
- Credit issue
- DefaultsUsually stays on your credit file for 6 years from the default date.
- Reason for remortgaging
- Consolidating debtsSecuring debts on your home carries extra risk and needs careful thought.
In short
- Recent or numerous defaults tend to make lenders more cautious about wider consolidation.
- Some lenders may require certain defaulted accounts to be cleared on completion.
- Settled defaults still stay on your file for 6 years from the default date.
- A regulated adviser must consider whether consolidating is appropriate compared with other options.
Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home. Borrowing over a longer term can mean paying back more in total.
How do defaults affect consolidating other debts?
A default shows that an account was closed after missed payments, and it is often one of the debts a homeowner wants to consolidate in the first place. When you are asking to borrow more to clear separate debts, a lender still looks at every default on your file, not just the ones you plan to pay off, to judge how much difficulty you have had managing credit.
Our what is a default? guide explains how these are recorded, and how long a default stays on your credit file covers the 6-year rule in more depth.
How many defaults, and how recent, tends to matter most
One older, settled default is generally viewed very differently from several recent ones. Lenders that consider adverse credit often group applications by how many defaults there are and how long ago the most recent one was recorded, rather than by the amount alone.
| Situation | What tends to happen |
|---|---|
| One or two older, settled defaults | Usually the least restrictive; more lenders may consider it |
| Several recent defaults | Fewer lenders, and some may want the defaults cleared as part of the remortgage |
| A mix of settled and unsatisfied defaults | The unsatisfied ones tend to draw more attention |
| Defaults on the same debts you want to consolidate | May be dealt with directly through the completion funds |
A general pattern, not the criteria of any particular lender.
What might a lender require on completion?
Where consolidation includes clearing defaulted accounts, some lenders may insist those specific debts are repaid, sometimes with the solicitor paying the creditor directly from the completion funds rather than releasing the money to you first. This gives the lender certainty the debts are actually cleared.
Where the defaults you have are separate from the debts you want to consolidate, a lender may simply weigh them as part of your overall credit history rather than requiring anything specific. It is worth asking any adviser or lender directly which approach applies to your application.
Paying off defaulted cards or loans through a remortgage settles the balance, but the money is now borrowed against your home. Falling behind on the new mortgage could put your home at risk, and spreading the debt over a longer term can mean paying more overall.
Alternatives to consolidating debt that has defaulted
- Negotiating directly with the creditor, who may accept a lower settlement figure or a payment plan.
- A debt management plan, which keeps defaulted debts unsecured while you repay at an affordable rate. See remortgaging with a debt management plan.
- A second charge mortgage, which leaves your existing mortgage deal in place but still secures the debt on your home.
- Waiting, if some defaults are close to their 6-year drop-off, since this can widen your options later.
Free, impartial advice from MoneyHelper, StepChange and National Debtline can help you compare these before deciding.
What may shape consolidating debt when you have defaults
| Factor | Why it matters |
|---|---|
| Number of defaults | Several defaults tend to be viewed more cautiously than one or two. |
| Age of each default | The default date sets when it drops off your file after 6 years, and older ones usually weigh less. |
| Whether defaults are settled | Settled defaults are often viewed more favourably, though they still stay on record for the full 6 years. |
| Whether the default relates to the debt being consolidated | A default on the same account you want to clear can affect how a lender structures the completion. |
| Total amount being consolidated | The combined balance sets how much extra you need to borrow. |
| Loan to value | Consolidating more debt raises your LTV, which can narrow your options with adverse credit. |
| Other credit issues | Defaults alongside a CCJ or missed payments elsewhere are usually assessed together. |
| Income and affordability | The larger mortgage must still pass a stress test against your income and outgoings. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- A list of every default, with creditor, balance, default date and current status
- Which defaults, if any, you want to clear as part of the consolidation
- Your credit reports from Experian, Equifax and TransUnion
- Your mortgage balance, deal end date and any early repayment charges
- An estimate of your property’s current value
- Proof of income and a realistic monthly budget
Frequently asked questions
Can I consolidate debts if I have defaults that are still unsatisfied?
It may be possible, but some lenders may require unsatisfied defaults to be paid on or before completion. Our page on unsatisfied defaults covers this in more detail.
Do all my defaults need to be cleared to consolidate other debts?
Not always. Some lenders may only want specific defaults dealt with, particularly larger or more recent ones, and may weigh older or smaller settled defaults alongside the rest of your file instead.
Will consolidating remove my defaults from my credit file?
No. Paying off a default marks it as satisfied or settled, but it still stays on your file for 6 years from the default date, whether or not it is paid.
What if my defaults are on debts I am not trying to consolidate?
A lender still sees every default on your file when assessing the application, even if you only want to clear separate debts. It may weigh those defaults as part of your overall credit history rather than requiring anything specific.