Personal loans for debt consolidation
This guide will teach you about debt consolidation loans, how to lower your repayments and the best ways to get out of debt.
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A debt consolidation personal loan works by combining your existing loans and debts into one single lump-sum loan. If you're struggling with multiple debts, a debt consolidation loan can help to reduce your interest rate, fees, monthly repayments and the overall cost of your debt over time. However, it's important to compare the market for a cheaper rate than your current debts to ensure savings.
Avoid the stress of dealing with multiple repayments, rates and fees, so you can focus on paying off your debt more quickly.
- Personalised fixed rate
- Flexible payment options
- Fast online application
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OurMoneyMarket Personal Loan
⭐ 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.
Apply personalised loan from $2,001 to $75,000 that varies based on your credit history and financial situation.
- Interest rate from: 5.35% p.a.
- Comparison rate: 6.31% p.a.
- Interest rate type: Fixed
- Application fee: 1.5–6% of your total loan amount
- Minimum loan amount: $2,001
- Maximum loan amount: $75,000
Compare debt consolidation loans in Australia
What's in this guide?
- Situations where a debt consolidation loan could help you
- Steps to consolidating your debt with a personal loan
- The dos and don'ts of debt consolidation loans
- How can I get a debt consolidation loan with bad credit?
- How to compare bad credit debt consolidation loans
- What to consider when consolidating debt with a personal loan
- How to get the most out of debt consolidation
- How to calculate if a debt consolidation is right for you
- What other debt consolidation methods are available?
- Four debt reduction strategies you can consider
Situations where a debt consolidation loan could help you
- You have multiple debts with different fees. These could include debts from credit cards, personal loans, car loans or wedding loans.
- You're struggling to make the repayments for the different debts you owe.
- You're looking for a cheaper way to pay off your debts.
- You find that keeping track of all your debts is confusing or overwhelming.
Steps to consolidating your debt with a personal loan
Once you have decided to consolidate your debt, you will need to do the following:
- Calculate how much you need to borrow to cover your debts. This should include any fees or charges you will have to cover in order to pay off your existing debts early.
- Research and compare personal loan products to find one that meets your needs.
- Apply for the personal loan.
- Use the funds to pay off your other debts, along with any fees or charges.
- Continue to make repayments on your personal loan until it has been repaid.
If you want to consolidate your debt using another method, such as using a credit card, you can read our comprehensive guide to debt consolidation.
The dos and don'ts of debt consolidation loans
- Make sure to factor in all the costs of consolidating your debt. This can include establishment fees, early repayment fees, loan applications fees and any other costs. The cost of consolidating your debt could potentially be more than what you're paying for your current loans. Using a personal loans calculator can help you work out exactly how much you'll be paying.
- Consider turning your unsecured debts into a single secured debt by offering an asset that you own (such as your car) as security for the loan. This can be a great way to secure a lower interest rate, which could potentially save you more money over the life of your loan.
- Before applying for a debt consolidation loan, try negotiating with your current lenders to factor in your financial situation to see if they can temporarily pause or lower your loan repayments.
- Read the fine print for any debt consolidation loans that you are considering. This can help you understand specific details, such as whether the lender allows you to make monthly or fortnightly repayments or make extra repayments without being penalised.
- Don't automatically switch to a longer loan term without doing the calculations. While it might give you lower monthly repayments, it could end up costing you significantly more in interest fees.
- Don't forget to make sure the credit provider you're considering is credible. You can do this by checking if it's listed on ASIC Connect's Professional Registers. Be wary of companies that try to rush through the process, make unrealistic promises or ask you to sign blank documents.
- Avoid rolling your debts into your mortgage. Home loans generally have longer terms and this could lead to you paying more in interest fees over the life of your loan.
- Don't go into more debt. This means that you should stop relying on credit cards or other loans until your existing debts have been settled. The more money you can put towards making your repayments, the faster you can get out of debt.
Are you struggling financially?
If you're struggling financially and would like to speak to someone for free financial advice, information and assistance you can call the Financial Counsellors hotline on 1800 007 007 (open from 9:30am to 4pm, Monday to Friday). If you are suffering financial problems related to the coronavirus pandemic you may be eligible for additional support. Find out more here: https://www.finder.com.au/coronavirus-financial-help
⚠️ Warning about Borrowing
Do you really need a loan today?*
It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
- For information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor
- Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan
- If you are on government benefits, ask if you can receive an advance from Centrelink: Phone: 13 17 94
The Government's MoneySmart website shows you how small amount loans work and suggests other options that may help you.
* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.
How can I get a debt consolidation loan with bad credit?
Those with a bad credit history have a few options to consolidate their debt:
- Apply for an unsecured personal loan with a specialist lender. Some lenders offer large, unsecured personal loans to people with bad credit. Interest rates are higher than with standard personal loans, but people may still be able to reduce what they're currently paying.
- Consider a Part 9 Debt Agreement. Debt agreements, which are a form of bankruptcy, are an option for people with large debts they are unable to repay. The financier will negotiate with lenders on the behalf of someone under debt stress and their debts won't accrue any more interest. This agreement will be listed on a person's credit file for five years from the date that they enter into the agreement.
Need help managing your debt consolidation?
Fox Symes Debt SolutionsFox Symes offers a range of debt consolidation options to help you if you're struggling with multiple debts.
How to compare bad credit debt consolidation loans
Like any debt or loan solution, it's important to compare options to find the best possible solution. Here are some things to keep in mind when comparing bad credit debt consolidation loans:
- The lender needs to be reputable. Unfortunately, there are disreputable lenders who prey on those with bad credit. They promise loans, but then charge high rates and fees. Before submitting an application for a loan with a lender, prospective applicants should take a look at the lender in question's website and see how easy it is to locate information, see if they are easily contactable and even read some third-party customer reviews online.
- Fees are expected, but they shouldn't be excessive. To find out how fair the fee structure is, compare options online and see what other lenders are charging. Some common fees include loan establishment fees, monthly account-keeping fees, additional repayment fees, default fees and dishonour fees. Loan customers ought to also make sure to check any fees that they might have to pay for using certain features, such as being charged for making additional repayments or utilising a redraw facility.
- Rates also need to be reasonable. The point of a debt consolidation loan is to save the person with current debt money from reduced interest across their credit accounts. If the rate charged is too high then they may not be saving much money, or may even end up worse off. Borrowers should compare their options to see what a reasonable, competitive interest rate is.
- Loan terms that are offered by the lender should meet a borrower's debt consolidating needs. The terms will also affect how much repayments will be and also how much interest they will end up paying over the course of the loan.
- What someone is able to consolidate may also differ between lenders, so loan customers might want to check this before they apply. Some lenders may allow their approved applicants to consolidate any debts from open accounts, but they may have limits. Other lenders may only allow people to consolidate credit card debt or only personal loan debt. Applicants should make sure that they will be able to consolidate what they need to when they compare their options.
What to consider when consolidating debt with a personal loan
- Affordability. You should confirm that the personal loan you use will be cheaper to pay off than your existing debts. You must also ensure that you will be able to cover the repayments on your new loan to avoid going into further debt.
- Early repayment costs. Many loans will require you to pay additional fees or charges if you repay the loan early. These will need to be paid if you wish to consolidate your debts under a new loan and should be included in your calculations to ensure debt consolidation is the right choice for you.
- Legitimacy. Always make sure to check that the lender you wish to use is ASIC-licensed and legally able to operate in Australia.
How to get the most out of debt consolidation
- Set a budget to manage repayments.
- Use Finder's financial boot camp.
- Make extra repayments to pay off your debt sooner.
- Look for money hacks/ways to cut down expenditure.
- Compare your options to get the best personal loan for your situation.
What are the pros and cons of debt consolidation loans?
- Simple, single repayment.
- You can reduce your overall payments and costs.
- No more phone calls from debt collectors.
- You may increase your debt if you fail to make repayments.
- You will need to pay any fees or charges for breaking your existing loans.
How to calculate if a debt consolidation is right for you
Laura's debt consolidation calculation
Laura has $23,000 in total debt. Her debt includes the following:
|Type of loan||Unsecured personal loan||Credit card||Car loan|
|Amount left to pay||$10,000||$5,000||$8,000|
|Current interest rate||18% p.a.||20% p.a.||16% p.a.|
|Current monthly repayments||$500||$150||$300|
Currently, Laura is paying $950 per month in loan repayments. Laura decides to consolidate her debts into a single personal loan:
- Loan amount: $23,000 loan
- Interest rate: 7% p.a.
- Loan term: 3 years
- New monthly repayments: $707.91
- Total savings: $3,142*
*Assuming there are no penalty charges for repaying loans early.
Not only does Laura reduce her monthly repayments by $242.09 per month, but she also saves $3,142 overall over the 3-year loan term.
What other debt consolidation methods are available?
Debt consolidation loans are not the only type of credit available to you if you're struggling with debt. Find the debt consolidation method that is going to work best for your needs and the type of debt you have:
- Balance transfer credit cards. If you have credit card debt across multiple accounts, you can consolidate it into a single card with a balance transfer. You will pay 0% interest for a specific period of time, with some card providers offering up to 24 months. Certain credit card providers also let you balance transfer personal loan debt. For this method, you will also need good credit to be approved.
- Part 9 Debt Agreements. If you're having trouble paying your debt, you could enter into a debt agreement with a third-party organisation and your creditors. The agreement essentially freezes the interest you're paying and gives you a certain repayment period to pay back what you owe. Some creditors agree to accept less than the full balance for repaying your debt, but entering into a debt agreement shouldn't be taken lightly as it is considered a form of bankruptcy.
- Credit counselling. Enlist the services of a reputed credit counselling organisation for formulating a Debt Management Plan (DMP). Once you enrol in a DMP, the creditors will often reduce your interest rates. Afterwards, you will need to make one monthly payment to the counselling organisation. This organisation will handle the repayment to your creditors. This is worthwhile if you can repay your debt within five years, but again, it isn't a decision that should be taken lightly. This should only be entered into if you are having difficulty repaying your debts on your own.
Staying out of debt
When it comes to staying out of debt, there are quite a few things you can do. You could look at developing an emergency fund by trying to save up to 15% of your income. If you find this number a bit high, or just want a way to ease the financial strain, you could consider ways to create alternate sources of income. There are a number of ways to make money online with freelance work by charging people for your skills. You could also consider selling some of your unused items or looking at your expenses and seeing ways you could cut back. As always, creating a budget and sticking to it is a sure-fire way to keep you on track.
Four debt reduction strategies you can consider
If you are considering tackling your debt head-on without taking out a debt consolidation loan or other type of credit, there are ways to help you take back control of your finances:
1. The "snowball" or "domino" method.
- Write down your total outstanding debts. This involves you making a list of your total outstanding debt on each of your credit accounts, except for your mortgage and HECS-HELP debt. You don't need to consider interest rates at this point.
- Check early exit penalties. Consider early repayment fees for your personal loans and contact your lender if you have any concerns regarding repaying your loans early.
- Start to pay off your smallest debt. Whichever account has the smallest balance is the account you make additional payments into and you pay off first.
- And so on. Once you've repaid your smallest debt, start to make additional payments to the next smallest balance, then the next smallest, and so on – until you are out of debt.
- Similar sized balances. If two accounts have similar balances, pay off the higher interest rate account first.
- Keep making your minimum repayments. Remember to keep paying the minimum balance on all accounts.
2. Pay off your highest interest balances first
Another strategy is to pay your highest interest balances first. Paying off these accounts will save you money on interest repayments and have the same benefit as the "snowball" strategy in that it will help get your accounts closed.
To do this, you should do the following:
- Write down all outstanding debts. Start by writing down all your accounts, the balance outstanding on each and the interest rates.
- Start making additional repayments. Remember to consider the balance of credit accounts when starting to pay them down as well as how much interest the lenders are charging.
- Keep paying your minimum. Remember to keep making minimum repayments on all accounts.
3. Make savings where possible
Finding the money to make additional payments can be a struggle. Luckily, there are a number of ways that you can save money effectively by making just small changes to your lifestyle. These include the following:
- Upgrading your savings account. When was the last time you compared your savings accounts? You may be able to find an account with a better interest rate than your current savings, making your money go further.
- Utilising coupons. Before making a purchase, have you looked to see if you could find it cheaper with a coupon code?
- Put whatever you can aside. Saving where you can and putting all your additional funds into your prioritised debt (according to the strategy you've adopted) is key to being debt-free.
4. Budget, budget, budget
Developing and sticking to a budget is of paramount importance when it comes to getting out of debt. There are a number of budgeting websites, tools and apps available that can help you to do the following:
- Track your spending
- Manage your invoices
- Manage your bills and expenses
- Round up your money to the nearest dollar to add to a savings account
Other questions you may have
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ANZ debt consolidation using a balance transfer or personal loan
Consolidate your debts into one account and repay your balance at a low interest rate with a personal loan or balance transfer credit card with ANZ.
Personal Loan OffersImportant Information*
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.
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.
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.
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.
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