What you need to know:
- Debt consolidation can minimise your repayments if you have multiple debts.
- There are 3 key ways you can consolidate your debts.
- You may still be able to consolidate your debt if you have bad credit – but it might cost more.
Debt consolidation involves opening another credit account to pay off your existing debt. This can be done with a personal loan, a credit card or a home equity loan. By opting to pay off your other debts and maintain a single credit account, you can reduce how much fees and interest you're paying. This can help you save money and get out of debt faster.
The best way to consolidate your debt will depend on a number of factors. These include how much you owe, the type of debt, your financial situation and eligibility for each option. The table below will guide you through the options available. We've also included what these loans are suitable for.
|Debt consolidation personal loan||Balance transfer credit card||Mortgage refinancing|
|How it works||Take out a new loan with a lower rate and pay off your other debts.||Transfer loan or credit card debt to a new card with a 0% interest rate.||Use the equity in your home as a line of credit to pay off your debt.|
|Cost||Pay around 12% p.a. Up to 7 years. Some fees may apply.||Pay 0% for about 2 years. Some fees may apply.||Pay about 5% for as long as you need. Fees may apply.|
|Accepted debt amounts||$2,000 to $50,000||$500 to $8,000||$40,000 +|
For personal loan debt
This is one of the most common ways people choose to consolidate or refinance their existing personal loan debt.
Take out a new personal loan, one with lower interest and fees than your current loan. By paying off the higher interest debt, you can bring down your total repayments and save money.
For credit card debt.
This may be a good option if you don't mind paying interest or you have more than a few thousand dollars' worth of debt and you're unlikely to move the full amount to a new credit card.
Apply for a lump sum to cover your credit card debt and use that money to pay off your card's balance. In exchange, you receive a regular payment structure and longer payment terms.
For personal loan and credit card debt.
You can apply to consolidate both personal loan and credit card debt at the same time with a new personal loan. It is likely you have a higher total amount of debt, so this option may work best. But don't forget to factor in any early repayment or exit fees, as this can add up across multiple accounts.
For credit card debt.
This is the most common way to consolidate credit card debt. You basically have to apply for a new card and move what you already owe onto it. You can take advantage of low or 0% interest offers to pay off your debt.
You can still take advantage of promotional 0% p.a. Interest rates for set periods, but once that has finished the rate will revert back to the standard rate (usually above 20% p.a.).
It's also important to note that most credit cards only allow you to transfer about 80% of your approved credit limit. This means that even if you're approved for a $10,000 credit limit, you may only be able to transfer $8,000.
For personal loan and credit card debt.
You can apply to consolidate both personal loan and credit card debt at the same time on cards from the providers listed above. Make sure the balance transfer limit is high enough for this to work.
For personal loans, credit cards, and both.
If you have a mortgage, you have the option of taking out a home equity loan to consolidate and pay off your other debts. This option should only be used if you can be disciplined with your repayments and can build back your equity relatively quickly.
It will function as a line of credit, where you'll pay for what you borrow, not the entire credit limit given to you. This option can seem cheaper as home loans offer lower rates. But it is risky, difficult to manage and has no end-date. This can offset any savings earned with higher interest in the long run. Make sure you do the calculations to see if this option is economical. Interest, upfront fees and ongoing fees may be applicable.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Let's say you've found a debt consolidation loan for the $20,000 debt you owe.
The new loan charges 11.99% in interest over 5 years, and doesn't charge a monthly fee. This means your monthly payments work out to $455. You would have paid $6,687 in interest.
By consolidating your debt and choosing a product with a lower rate and fees, you could save $5,699 in total. How much you can save will depend on your risk profile and eligibility, so be sure to compare your options and read the fine print.
While having bad credit can limit your options, debt consolidation is still possible. It may involve entering into a Part 9 Debt Agreement, but not necessarily. You may also end up paying higher interest rates and fees.
If your application is rejected, here's what you should do:
Looking to consolidate your debt? Salt and Lime offers fee-free loans, same-day funding, and the ability to earn discounts on your interest over the life of the loan. Apply today.
Want to understand the differences between personal insolvency and bankruptcy, and what both of these terms mean for your financial future? Find out here.
This guide will take you through the consequences of bankruptcy so you can decide if it's the right option for you.
What is debt negotiation and how can it help you? Find out here.
It doesn't matter how long you've been in debt or how much debt you have, there are strategies you can use to free yourself from any kind of debt trap. Use our guide to see how you can set yourself on the road to regaining financial control, and getting out of debt once and for all.
You'll receive a fixed rate from 6.57% 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.
You'll receive a rate from 6.99% p.a. to 18.49% p.a. with a comparison rate from 7.69% p.a. to 19.09% p.a. if you're approved.
Apply for up to $50,000 to use for a variety of purposes without needing to add security. Available to self-employed applicants. T&C's apply.
You'll receive a fixed rate between 6.99% p.a. and 19.99% p.a. ( 7.91% p.a. to 20.83% p.a. comparison rate) based on your risk profile
Borrow from $5,000 to $55,000, with 1 years to 7 years loan terms available. This loan comes with no fees for extra repayments and no early exit fees.
You'll receive a fixed rate between 6.75% p.a. and 26.95% p.a. based on your risk profile
Apply for loans from $5,000 and get a dedicated loan manager. No security required.
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