Experts weigh in: Best way to pay off in $50,000 in debt | finder.com.au

The best way to pay down $50,000 in debt

Debt can creep up on you, so what do you do when it hits $50,000? Learn how to pay off $50,000 of debt.

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

Debt always starts out small, and while for many people it doesn't grow into a big problem, for others it does. This page discusses expert-approved strategies for paying down a large sum of debt. To find out the best ways to pay off $50,000 of debt, follow this guide.

The $50,000 problem

Joe and Lillian are in an enviable position as homeowners. They purchased a house 12 years ago for $287,000 and currently have a variable rate loan with ANZ. They have $130,000 in equity and $157,000 in principal remaining. Their net household income is $64,168.

While they have assets, they also have considerable debts. At the moment they have a $20,000 debt on their HSBC Platinum credit card and a $30,000 car loan debt with Bankwest.

Noel Whittaker

Finance expert, Sydney Morning Herald

Smallest to largest

If the term is fairly short – under five years – there is really no point in chasing a cheaper rate. This is why I recommend the strategy of paying off the smallest loan first if you've got several personal loans. A key factor is to improve your money management habits if you are in trouble because of that. Otherwise, you'll be back where you started, even if you do manage to pay off the existing debts.

I am aware of the strategy of consolidating all your debts into your home loan to get a cheaper rate and this will work if you substantially increase the repayments on that loan. Otherwise, all you'll be doing is stretching out your current personal loans to 30 years! If you have investment loans as well as non-deductible housing loans – most people in trouble don't – you could move the investment loans to interest only which should reduce the repayments on them and then use the money so saved to speed up the payments on your non-deductible loans.

Robert Dawson

Financial Advisor, Insight Investment & Retirement Strategies

The main problem and two solutions

Joe & Lillian’s core problem is that their net income is only $5,333 per month but their combined debt expenses (based on current interest rates and probable repayment schedules) are now $2,860, 53% of the net income per month.

This is comprised of the following:

  • Credit card debt minimum repayment of $600 per month ($333 interest at 20% p.a.)
  • Personal loan (typically over five years) now in year four with $775 in repayments per month ($275 interest at 11%)
  • Mortgage of $1485 month (including interest of 6.5% $850 per month)

This only leaves them $570 per week to live on. There are a couple of options.

Option 1: Debt consolidation into your mortgage

The simplest solution is to approach their bank and consolidate their credit card and personal loan into the mortgage, using the equity in their home, but maintain a high repayment schedule. Their new debt will be $207,000 and on the old remaining 13-year time frame the repayments will be $1,957, up from $1,485 per month.

But the total interest payments are now spread over another 13 years which is greater than the original car and car loans interest payments were over only five. So they still need to set a target of say 40-45% of income to service the debt.

At 45% of net income, the repayments should be $2,400 per month and the whole debt now will be eliminated in only nine years and nine months instead of 13 years. They will now also have an extra $100 per week to live on. If they occasionally wander off the repayments they have set themselves, then they will still reduce their total interest payments from $100,000 over 13 years to say $73,000 - $75,000 over the period they do pay back the loans.

This amount is close to the total interest that the home loan itself was going to be over the 13-year period. They have effectively eliminated the $50,000 in debt virtually interest-free, so to speak.

Option 2: The 18-month kill zone

An additional little twist to add value – if they really wish to kill their debt and can manage the existing repayments for just another 18 months is as follows:

1. Apply for another credit card that has a special 0% interest-free period to rollover the existing $20,000 card debt and repay that at the same rate as the minimum $600 per month required. All of this will go to reduce the debt, not half of it.

2. Consolidate the car loan debt with the mortgage but maintain the same repayment rate added to the existing home repayment. Then with your credit card the new arrangement will, over six months, eliminate $3,600 of debt and if repeated on another credit card, six months later will reduce another $3,600. At the end of a third six-month period they will have eliminated $10,800. There is a limit as to how long you can keep doing this and you need to get rid of the old cards as you acquire a new one with an interest-free period.

If they then add the remaining $9,200 to their mortgage in 18 months, the total amount outstanding will then be approx. $174,000 at that point in time. Then set the overall repayments at the 45% of income ($2400) the total debt will be eliminated in the remaining eight years and the remaining interest paid will be approximately only $48,000 (at 6.5%). However, great discipline is required to achieve this.

*Important: This is general advice only on credit card and debt management

Visit Robert Dawson's website Insight Investment & Retirement Strategies: iirs.com.au

Lesson learnt: Getting into debt is easier than getting out

Where to next? Explore some of our other guides about debt and financial management.

Want to put some of our expert's strategies into action?

Data updated regularly
$
% p.a.
Name Product Balance transfer rate Purchase rate Annual fee Amount saved
Citi Rewards Card - Balance Transfer Offer
0% p.a. for 30 months
21.49% p.a.
$49 annual fee for the first year ($149 p.a. thereafter)
Save on interest with 0% p.a. on balance transfers for 30 months with no balance transfer fee. Plus, a $49 first-year annual fee.
Kogan Money Black Card - Exclusive Offer
0% p.a. for 24 months
20.99% p.a.
$0
Finder Exclusive
Save with a $0 annual fee and a 0% introductory rate on balance transfers. Plus, earn $50 Kogan.com Credit and uncapped rewards points.
Coles No Annual Fee Mastercard - Exclusive Offer
0% p.a. for 12 months
0% p.a. for 12 months, reverts to 19.99% p.a.
$0
Finder Exclusive
Earn 10,000 bonus Flybuys points and save on interest charges with 0% p.a. on balance transfers and purchases for 12 months.
ANZ Low Rate
0% p.a. for 20 months
12.49% p.a.
$0 annual fee for the first year ($58 p.a. thereafter)
Save with 0% p.a. on balance transfers for 20 months (with no BT fee) and $0 first-year annual fee. Plus a 12.49% p.a. purchase interest rate.
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
0% p.a. for 26 months
20.74% p.a.
$64 annual fee for the first year ($129 p.a. thereafter)
Get 0% p.a. for 26 months on balance transfers and a reduced first-year annual fee. Plus, $129 Virgin Australia Gift Voucher per year.
Virgin Money No Annual Fee Credit Card
0% p.a. for 12 months
0% p.a. for 12 months, reverts to 18.99% p.a.
$0
Save with an ongoing $0 annual fee and 0% p.a. on balance transfers and purchases for 12 months.
St.George Vertigo Classic
0% p.a. for 28 months
13.99% p.a.
$55
Enjoy a 0% interest rate on balance transfers for 28 months, with no balance transfer fee.
Bankwest Breeze Classic Mastercard
0% p.a. for 26 months with 2% balance transfer fee
10.99% p.a.
$0 annual fee for the first year ($49 p.a. thereafter)
Save with 0% p.a. on balance transfers for 26 months (with a 2% BT fee) and $0 first-year annual fee. Plus, a 10.99% p.a. purchase interest rate.
Bendigo Bank Low Rate Credit Card
0% p.a. for 24 months with 2% balance transfer fee
11.99% p.a.
$45
Save with 0% p.a. on balance transfers for 24 months (with a 2% BT fee). Plus a 11.99% p.a. purchase interest rate.
Citi Rewards Card - Points & Gift Card Offer
0% p.a. for 15 months
21.49% p.a.
$49 annual fee for the first year ($149 p.a. thereafter)
Receive 90,000 bonus Citi reward Points (worth $400 in gift cards) and a $100 Coles eGift Card when you spend $3,000 in the first 90 days.
Qantas Premier Platinum
0% p.a. for 18 months with 1% balance transfer fee
19.99% p.a.
$199 annual fee for the first year ($299 p.a. thereafter)
Get 100,000 bonus Qantas Points when you spend at least $4,000 within the first 3 months. Plus a discounted $199 first-year annual fee.
Westpac Low Rate Card
0% p.a. for 28 months with 1% balance transfer fee
13.74% p.a.
$0 annual fee for the first year ($59 p.a. thereafter)
Save with a $0 annual fee for the first year, plus, a 0% interest rate on balance transfers for 28 months.
Citi Rewards Card - Velocity Points Offer
0% p.a. for 15 months
21.49% p.a.
$99 annual fee for the first year ($199 p.a. thereafter)
Enjoy 100,000 bonus Velocity Points when you spend $3,000 in the first 90 days. Plus, complimentary travel and purchase insurance.
Westpac Altitude Platinum Qantas
0% p.a. for 18 months with 1% balance transfer fee
20.49% p.a.
$149 annual fee for the first year ($200 p.a. thereafter)
Get 60,000 bonus Qantas Points when you spend $3,000 within 90 days. Plus, a first-year annual fee discount and a 0% balance transfer offer.
Coles Rewards Mastercard
0% p.a. for 18 months with 1.5% balance transfer fee
19.99% p.a.
$0 annual fee for the first year ($99 p.a. thereafter)
Enjoy 20,000 bonus Flybuys points (worth $100 at Coles), a $0 first-year annual fee and an 18-month balance transfer offer.
Bankwest Breeze Platinum Mastercard
0% p.a. for 26 months with 2% balance transfer fee
10.99% p.a.
$0 annual fee for the first year ($69 p.a. thereafter)
Get 0% interest on balance transfers for 26 months, a $0 first-year annual fee, complimentary travel insurance and no foreign transaction fees.
NAB Low Rate Credit Card
0% p.a. for 20 months with 2% balance transfer fee
12.99% p.a.
$59
Get a 0% p.a. interest rate for 20 months on balance transfers, Visa Offers + Perks and a competitive $59 ongoing annual fee.
Citi Simplicity Card
0% p.a. for 6 months
0% p.a. for 6 months, reverts to 21.49% p.a.
$0
Get 0% p.a. interest for up to 6 months on purchases and balance transfers. Plus, a $0 annual fee for life.
Citi Clear Card
0% p.a. for 15 months
14.99% p.a.
$49 annual fee for the first year ($99 p.a. thereafter)
Get $250 cashback when you spend $3,000 within the first 90 days. Plus, a 0% balance transfer offer and first-year annual fee discount.
Bankwest Zero Platinum Mastercard
2.99% p.a. for 9 months
17.99% p.a.
$0
Offers a $0 annual fee, 0% foreign transaction fees, complimentary international travel insurance and a balance transfer offer.
loading

Compare up to 4 providers

Data updated regularly
$
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Service Fee Monthly Repayment
Plenti Personal Loan

From 6.39% (fixed)
6.39%
$2,001
3 to 7 years
$0 to $999
$0
You'll receive a fixed rate between 6.39% p.a. and 17.89% p.a. based on your risk profile
A flexible loan with amounts from $2,001 and terms starting from 3 years. Interest and comparison rates calculated for a loan term of 5 years.
Symple Loans Personal Loan

From 5.75% (variable)
6.47%
$5,000
1 to 7 years
from 0% to 5% of the loan amount
$10
You'll receive a personalised interest rate from 5.75% p.a. to 25.99% p.a. based on your risk profile
Borrow up to $50,000 to pay for what you need.
SocietyOne Unsecured Personal Loan (5 years)

From 6.39% (fixed)
6.39%
$5,000
5 years
from 0% to 5% of the loan amount
$0
You'll receive a fixed rate between 6.39% p.a. and 19.99% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.
SocietyOne Unsecured Personal Loan (2-3 years)

From 6.39% (fixed)
6.39%
$5,000
2 to 3 years
from 0% to 5% of the loan amount
$0
You'll receive a fixed rate between 6.39% p.a. and 17.49% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.
Alex Personal Loan

From 5.49% (fixed)
5.49%
$2,100
6 months to 5 years
$0 (Waived $295 establishment fee)
$0
You'll receive a fixed interest rate from 5.49% p.a. to 19.99% p.a. based on your risk profile
Borrow between $2,100 and $30,000 from 6 months to 5 years. Note: The $295 establishment fee will be waived for loan applications submitted by 3 May 2021
Harmoney Unsecured Personal Loan

From 6.99% (fixed)
7.79%
$2,000
3 to 5 years
$575 ($275 for loans of below $5,000)
$0
You'll receive a fixed rate between 6.99% p.a. and 24.79% p.a. based on your risk profile.
Apply for a loan up to $50,000 and repay your loan over 3 or 5 years terms.
Wisr Personal Loan

From 6.49% (fixed)
6.76%
$5,000
3 to 5 years
$595
$0
You'll receive a fixed rate between 6.49% p.a. and 19.95% p.a. based on your risk profile
A loan from $5,000 that charges no fees for extra or early repayments. Keep in mind security is required in some cases.
OurMoneyMarket Personal Loan

From 5.35% (fixed)
6.31%
$2,001
1 to 7 years
1.5–6% of your total loan amount
$0
You'll receive a fixed rate from 5.35% p.a. to 20.99% p.a. based on your risk profile
A personalised loan from $2,001 to $75,000 that varies based on your credit history and financial situation.


⭐ Finder Exclusive: Apply before April 30th to secure a discounted rate of 5.35% p.a. (comparison rate: 6.31% p.a.) for the first 12 months.
CUA Unsecured Fixed Rate Personal Loan
9.39% (fixed)
9.64%
$5,000
1 to 7 years
$175
$0
You'll receive a fixed rate of 9.39% p.a.
An unsecured loan from $5,000 with flexible repayments and no monthly fee.
Latitude Personal Loan (Unsecured)

From 7.99% (fixed)
9.24%
$3,000
1 to 7 years
$250 (Loans under $5000 - $140)
$13
You'll receive a fixed rate between 7.99% p.a. and 22.99% p.a. based on your risk profile
Apply for what you need from $3,000 and use it for a range of purposes. Repay weekly, fortnightly or monthly. You can check your interest rate before applying with no impact to your credit score.
NAB Personal Loan Unsecured Fixed

From 6.99% (fixed)
7.91%
$5,000
1 to 7 years
$150
$10
You'll receive a fixed rate between 6.99% p.a. and 18.99% p.a. ( 7.91% p.a. to 19.83% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.
Pepper Money No Fee Personal Loan

From 5.95% (fixed)
5.95%
$5,000
18 months to 7 years
$0
$0
You'll receive a fixed rate between 5.95% p.a. and 17.95% p.a. based on your risk profile
Borrow from $5,000 to $50,000 and use for a range of purposes. Pay no upfront, early repayment or ongoing fees.
MoneyMe Personal Loans

From 6.25% (fixed)
7.64%
$2,100
1 to 5 years
from $295 to $495
$10
You'll receive an interest rate between 6.25% p.a. and 19.95% p.a. based on your risk profile
Borrow up to $50,000 with no hidden fees or costs. Application process usually takes 5 minutes to complete and is done fully online.
Plenti Variable Rate Personal Loan

From 6.39% (variable)
6.39%
$2,001
1 to 3 years
$0 to $999
$0
You'll receive a variable rate from 6.39% p.a and 16.89% p.a. based on your risk profile
A flexible loan with amounts from $2,001 and terms starting from 12 months. Benefit from transparent costs and a rate estimate before you apply.
CUA Unsecured Variable Personal Loan
11.89% (variable)
12.15%
$5,000
1 to 7 years
$175
$0
You'll receive a variable rate of 11.89% p.a.
Borrow from $5,000 with the option for flexible repayments and no monthly fees.
NAB Personal Loan Unsecured Variable Rate

From 6.99% (variable)
7.91%
$5,000
1 to 7 years
$150
$10
You'll receive a variable rate between 6.99% p.a. and 18.99% p.a. (7.91% p.a. to 19.83% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes. Benefit from fee-free additional repayments and a redraw facility. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.
NOW Finance No Fee Unsecured Personal Loan

From 5.95% (fixed)
5.95%
$5,000
18 months to 7 years
No Establishment Fee
$0
You'll receive a fixed rate between 5.95% p.a. and 17.95% p.a. based on your risk profile
Borrow from $5,000 to $7,999 with loan terms between 18 months and 3 years or borrow $8,000 to $50,000 with loan terms between 18 months and 7 years.


⭐ Finder Exclusive: Get a free $200 Westfield e-gift card once your loan application has settled. Offer ends on 30 April 2021. T&Cs apply.
loading

Compare up to 4 providers

Unfortunately, Fox Symes won't be able to help you at this stage. For more information on improving your credit learn more here.

Do you have a home loan?
Do you have unsecured debts of $10,000 or greater?
Do you receive a regular income?
Have you been bankrupt in the last 10 years?
Enter your details to speak to an expert from Fox Symes

By submitting this form, you agree to finder.com.au Privacy and Cookies Policy and Terms of Use, Disclaimer & Privacy Policy
Fox Symes Logo

Fox Symes can help you take back control of large debts by consolidating what you owe.

Fill out this form to find out if you can benefit from:

  • Reducing your repayments
  • Saving interest
  • A range of debt consolidation options

More guides on Finder

Personal Loan Offers

Important Information*
Logo for Harmoney Unsecured Personal Loan
Harmoney Unsecured Personal Loan

You'll receive a fixed rate between 6.99% p.a. and 24.79% p.a. based on your risk profile.
Apply for a loan up to $50,000 and repay your loan over 3 or 5 years terms.

Logo for ANZ Fixed Rate Personal Loan
ANZ Fixed Rate Personal Loan

You'll receive a fixed rate of 10.5% p.a.
Apply for up to $50,000 to use for a variety of purposes without needing to add security. Available to self-employed applicants.

Logo for NAB Personal Loan Unsecured Fixed
NAB Personal Loan Unsecured Fixed

You'll receive a fixed rate between 6.99% p.a. and 18.99% p.a. ( 7.91% p.a. to 19.83% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.

Logo for SocietyOne Unsecured Personal Loan
SocietyOne Unsecured Personal Loan

You'll receive a fixed rate between 6.99% p.a. and 20.49% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.

4 Responses

    Default Gravatar
    MarkNovember 10, 2013

    Hi there,
    My wife and I have saved a $20,000 deposit for our first home,and we have a car loan which owes $.45,000.Should we focus on getting the car loan down before applying for a mortgage or do lenders take that into account. Just worried that the bank will knock us back.

      Avatarfinder Customer Care
      ShirleyNovember 11, 2013Staff

      Hi Mark,

      Thanks for your comment.

      It is likely that your car loan affects the amount that you can borrow to purchase a property, but it shouldn’t really affect your chances of getting a home loan, given that both of you have a good credit history plus you already have a deposit.

      The borrowing power calculator can give you a good indication of how much you can borrow.

      Hope this helps,
      Shirley

    Default Gravatar
    BenJuly 24, 2013

    How can I manage to save on interest and bring down my debt fast, I earn 62k gross and no kids, pay 150 per week in rent and 150 on groceries etc.
    1# personal loan of 50k down to $26,400.12.9%
    2# flexi loan is $12,800 13.25%
    3# westpac credit card $13,897 12.9%
    4# anz credit card $8,867 16.8%

      Avatarfinder Customer Care
      JacobJuly 24, 2013Staff

      Hi Ben,

      Thanks for your inquiry.

      It should go without saying that you should focus on the balances which are attracting the highest rates of interest first. Due to the spread of the products you hold, you will be unable to consolidate all the balances onto a credit card through a balance transfer as you can only consolidate other credit cards, store cards, and charges cards (and in some cases personal loans and lines of credit) to a credit card.

      You have the option of consolidating all the balances under a debt consolidation loan.

      Another option is to continue to pay down the Flexi loan and consolidate the ANZ credit card, Westpac credit card and personal loan to a Citibank account or Virgin account.

      Citibank and Virgin are two institutions that allow you to transfer the balance of a personal loan or a line of credit to one of their credit accounts (credit cards and credit accounts). For example, the Citibank Ready Credit Account currently allows you to consolidate multiple balances under a promotional balance transfer rate or it allows you to write a cheque-to-self that is charged at the balance transfer promotional rate of interest. You can spend this cheque as you choose.

      The biggest issue I have found with repaying credit cards/loans is finding the sweet spot with how much to pay off the card(s) each month. If you pay too much, you may find that you have to redraw these funds towards the end of the month. Careful budgeting and discipline are important things to consider.

      I hope this helps,
      Jacob

Go to site