Government Debt Consolidation Loans

You might have seen an advert on TV stating they offer government debt consolidation loans.

More often than not, these companies do not have government backing.

Misleading adverts like this may make you think the government offer debt advice.

Well, unfortunately, this is not the case.

Companies that advertise for government-backed loans do so with the intent of making their debt advice seem more ‘official’.

These same companies tend to charge a fee for services and advice which you can get from a debt charity for free.

Read our article to find out where you can get professional debt advice for free.

What is meant by ‘government debt consolidation loans’?

There is no such thing as a ‘government debt consolidation loan’.

If you are looking for a money advice service, you should contact a professional, such as Stepchange debt charity, who can provide free help for your unique personal circumstances.

The only debt advisory services or debt solutions that the government offers are those listed below:

Debt Management Plan

A debt management plan is a setup agreement between the debtor and the creditors, which helps lay out a clear repayment plan.

Typically, a debtor, under a debt management plan, will make achievable monthly repayments, until the loan has been cleared.

The debt management plan can be terminated if you fail to meet your monthly repayment schedule.

Administration Order

You may seek out an administration order if you have a County Court Judgement (CCJ) against you, but you cannot afford the repayments.

This is only a plausible option if your debts amount to less than £5,000 and you owe money to at least 2 creditors.

Under an administration order, you have to make a monthly payment directly to the court.

The court will split this payment up and distribute it between your creditors.

The benefit of gaining an administration order is that the creditors listed on the AO cannot take any further action without first gaining permission from the court.

Individual Voluntary Arrangement (IVA)

Individual Voluntary Arrangements, or an IVA, is a government scheme that helps you repay your debts to creditors.

Under an IVA, you make a monthly payment to an insolvency practitioner, who will then split your payment up to the relevant lenders.

Your interest rate or charges will be frozen while you are paying under an IVA.

For many, an IVA may be the last option before you choose to file for bankruptcy.

An IVA can begin provided that the lenders who own at least 75% of your debts agree to this arrangement.

If you cannot make your IVA repayments, then the insolvency practitioner can force you into bankruptcy.


If you cannot afford to pay your debts off, then you can file for bankruptcy.

It costs £680 to apply for bankruptcy. An insolvency practitioner will review your application and decide whether you can be made bankrupt or not.

Your situation will be reviewed to decide if there are any other plausible options.

Once you have been deemed bankrupt, your personal assets can be used to pay back any loans.

Debt Relief Order (DRO)

Debt Relief Orders, or DRO, are an option for those that have:

  • Less than £30,000 in debt.
  • Less than £75 a month in disposable income.
  • Less than £2,000 in assets.
  • Don’t own a vehicle worth over £2,000.
  • Do not own a property.
  • Have lived in England and Wales for the last 3 years.

Under this kind of agreement, creditors cannot take action to recover the owed money without permission from the court.

After 12 months, the debt is usually cleared.

There are certain restrictions tied to a DRO that have to be considered.

For example, you can’t act as director of a company, promote or create a company without informing the court, or borrow over £500 without informing the lender of your DRO.

A DRO can be terminated if your financial situation does not improve, or you do not adhere to the restrictions in place.

Are interest-free government debt consolidation loans available?

Government debt support tends to include free support and advice.

For example, under an IVA agreement, any interest rates and charges are cleared while you focus on repaying your debts to the insolvency practitioner.

Standard debt consolidation loans tend to have charges and interest rates attached.

However, the rates tend to be lower than what you would have to pay with your combined debts.

This is why debt consolidation loans are popular, as your financial situation can be made simpler as you only have to make one repayment a month to one lender, rather than multiple.

Remember, a government-endorsed debt consolidation loan doesn’t exist, interest-free or not.

Only debt companies can offer consolidation loans, and they are not in any way related to the government.

What happens to companies advertising government debt consolidation?

Although there is no such thing as government-assisted debt consolidation, many companies still advertise for this phrase to manipulate their audience.

Suggesting their debt services are connected to the government may give them a false air of authority and cultivate some trust with their customers.

However, this couldn’t be further from the truth and these adverts are promoted with the intention of misleading people.

The Financial Conduct Authority, or the FCA, has noticed these disingenuous advertisements and has taken necessary steps to deal with them.

They have started punishing companies who falsely advertise for government-supported debt consolidation services.

The more the Financial Conduct Authority crackdown on misleading adverts, the less they will crop up.

However, if you ever see a company promoting any debt consolidation linked to the government proceed with caution.

Always remember that you shouldn’t have to pay for any debt advice. There are many debt charities that can provide you with professional financial advice at no charge.

Debt consolidation may be a plausible option for you, but make sure you know all the risks first and are sure you can make repayments.

What is a debt consolidation loan?

A debt consolidation loan is a way of grouping your existing borrowing into one monthly payment, rather than many.

This type of debt scheme is in no way related to the government, and you tend to have to pay an interest rate and charges to enter this kind of agreement.

There are two options for a debt consolidation loan:

  • Unsecured – the loan isn’t secured against any assets.
  • Secured – the loan is secured against your home or other assets.

Failure to successfully pay a debt consolidation loan can negatively impact your credit rating.

Always speak to a debt advisory service prior to entering into any agreements, to ensure you find the best solution for your unique financial circumstances.

To learn more about debt consolidation loans, read our informative article which has all the key info you need to know.

Where can I get debt help?

There is a wide selection of qualified debt charities that can offer free debt solutions and advice.

If you have unsecured debt and don’t know what options you have, always speak to a professional debt adviser.

They can help to assess your credit rating and suggest a suitable credit agreement or personal loan repayment plan.

For example, Stepchange debt charity offers a money debt advice service for any money worries and debt problems.

You can become debt-free with hard work, no matter how unachievable this may feel right now.

If you have a debt problem, start by seeking free advice to find the best way to deal with your debt. Get help now!


Don’t be fooled if you see an advert promoting a government debt consolidation loan, they don’t exist.

Manipulative advertising is constantly used to encourage customers to trust and use a company’s services.

A debt consolidation loan may be something worth investigating if you are struggling with multiple debts, but they are never connected to government support or facilities.

If you are struggling with debt, seek out free debt advice from debt charities.

Professional debt advisors can assess your unique financial situation and suggest a sensible repayment plan.