Couple in debt

Consolidate Payday Loan Debt

Information verified correct on March 31st, 2017

Have multiple payday loans and want to roll them into one? Find out what’s involved in our guide to consolidating payday loans.

If you are currently repaying two or more payday loans and finding the repayments difficult to manage, you may be wondering what your payday loan consolidation options are.

Can you use a payday loan to consolidate debts?

When you apply for a payday loan, the lender needs to take certain steps to determine whether you can afford your repayments. To ensure it is meeting ASIC requirements, it needs to determine:

  • If you are a debtor under any other small amount credit contract (SACC)
  • If you are in default of payment of an amount under any SACCs
  • If you have been a debtor under two or more SACCs in the 90 days prior to applying
  • If you are using the loan to repay another SACC

If you answered “yes” to any of the above, the lender has to take further steps to ensure that you will be able to repay the loan you are applying for. It does this by asking further questions about your financial situation.

What does this mean for borrowers?

If you want to consolidate payday loans, using another payday loan may not be your best option. That is, unless you can afford it. Payday loans are usually taken out because the borrower has few other options due to bad credit, is currently on Centrelink payments or is receiving a low income.

If you fall into the third category, using a high-cost payday loan to consolidate outstanding high-cost payday loans may not be the solution for you. However, there are other options available.

What options do you have for payday loan consolidation?

The following options can be considered if you want to consolidate your payday loan debts:

  • Unsecured personal loan.
    Rates vary for unsecured personal loans, especially for bad credit borrowers. To find out more you can read our guide on bad credit debt consolidation here.
  • Credit card balance transfer.
    There are a few card providers who will let you transfer your personal loan debt to a credit card, letting you have up to 24 months of 0% p.a. interest payments. The one drawback is you’ll need good credit to be approved. You can read more about the requirements and compare your options on this page.

Helping hands

Not eligible for payday loan consolidation? Strategies to pay down your debt

If you apply for loans and have your application rejected, or read through the eligibility criteria and can’t find a loan you’re eligible for, it’s time to find a way to pay down the loans that you have.

  • Get in touch with your lenders. Every payday lender has a financial hardship department that may be able to offer you assistance or help you establish a repayment plan. The earlier you get in touch your lender the easier it will be for you.
  • Draw up a budget. Sit down and work out all of your incomings and outgoings and see where you can cut back. There is online budgeting software you can also consider using to help you work out your finances.
  • Call the free financial counselling hotline. If you’re really struggling, there is a free financial counselling service you can call for personal advice. You can get in touch with the service on 1800 007 007.

If you’re stuck in a payday loan debt cycle, there is an avenue you can take to get out of debt. Whether it’s consolidating your payday loans or finding a way to repay your outstanding debts, start by comparing the options and finding the right method for you.

Elizabeth Barry

Elizabeth is a senior writer for specialising in personal finance. She enjoys reading PDSs so you don’t have to.

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