What clients need to understand before consolidating debts with a second charge

Debt consolidation replaces several debts with one loan. A client who swaps unsecured debts for one secured loan may pay less each month, often because the term is longer, and more in total over that term.^1,2

The security changes too. Debts that were unsecured become secured on the home, so falling behind could put the home at risk. MoneyHelper's test is simple: consolidating only makes sense if the total amount payable is less than before.¹

MCOB 4.7A.15R applies to the adviser. Where the main purpose of a mortgage is to consolidate existing debts, the adviser assessing suitability must take extra factors into account. The introducer's part is to set balanced expectations and pass on an accurate picture.²

Under MCOB 4.7A.15R the adviser takes account, where relevant, of:²

• the costs of extending the period over which the debts are repaid;
• whether it is appropriate to secure debts that were previously unsecured;
• if the customer is known to have payment difficulties, whether an arrangement with their creditors would be more appropriate than a new mortgage.

The FCA's March 2026 review of second charge found advice that "steered customers towards debt consolidation when it was not clear if it was appropriate". It also found that advisers didn't always document key discussions, "such as why particular debts are or are not being consolidated".^3,4

List every debt the client wants to clear, with its balance, monthly payment and whether it is secured. Note what the client wants to achieve, whether that is a lower payment, one bill or money for something else. The adviser needs that picture to make the assessment above.

When the recommendation comes back, look for the total amount repayable on the new loan beside the total still owed on the debts it replaces. That one comparison answers MoneyHelper's test.¹

Wording that keeps the conversation balanced:

• "It could lower what you pay each month, but you might pay more in total."
• "This loan would be secured on your home, unlike most of the debts it would replace."
• "The adviser will compare it with other options, including keeping things as they are."
• "I'll pass the adviser a full list of what you owe, so they see the whole picture."