Using a personal loan to consolidate debt

Using a personal loan to consolidate debt

Get back on track and simplify your repayments.

Jess Dickers
Jess Dickers 04 Jul 2024 ・ 3 min read

Juggling multiple debts can make your budget more difficult to manage, but there may be an easier way.

Consolidating existing debts using a personal loan could help you gain greater control of your finances and potentially put more money back into your pocket.

What is debt consolidation?

If you have debts from a few different sources, it can be easy to lose track of what payments are due and when.

Debt consolidation involves merging multiple debts into one loan with one simple repayment.

Lenders such as Liberty can help you to consolidate different types of debts including car loans, tax debt, credit cards, utility bills, and payday loans.

Consolidating multiple smaller debts can be a proactive way to get on top of repayments and reduce your risk of missing payments.

Why use a personal loan to consolidate debt?

Using a personal loan to consolidate debt allows you to take advantage of the personal loan’s features. These could include reduced interest rates, lower repayments, or more flexible loan terms.

You could end up paying less on the one repayment, than when you were repaying various debts from different sources. By reducing repayments, you could free up cash flow for other purchases or to save for a long-term goal.

A personal loan also provides the certainty of fixed repayments which could make it easier to stay on top of your budget.

How do I consolidate debt with a personal loan?

Here are some of the steps you might wish to take when looking to consolidate debt with a personal loan:

  • Assess your debts ─ listing all outstanding debts including amounts owed and current rates.

  • Compare options ─ find a lender, loan option, and personalised rate that works for your circumstances.

  • Loan application ─ apply for the personal loan, ensuring you have all the correct documentation.

  • Pay off debts ─ once your new loan funding is secured, your old debts can be paid out.

  • Stay on track ─ as you continue with your new repayment schedule, check in with your lender if you need any further support with your new loan.

What type of personal loan can I use?

There are two types of personal loans for debt consolidation ─ secured and unsecured personal loans.

Secured personal loans require you to provide an asset as collateral. This level of security helps determine interest rates, as unsecured loans can be riskier for the lender.

Whether an unsecured loan is approved by a lender is based solely on the lender’s review of your ability to repay the loan. They generally suit borrowers who don’t own any significant assets, but who have a strong credit history and a solid financial position.

Explore your options

If you’re dealing with multiple debts and looking for an easier solution, using a personal loan for debt consideration could be the answer.

At Liberty, we can help you find a lending solution and personalised rate that aligns with your circumstances. Explore our free-thinking personal loan options here.

Jess Dickers
Jess Dickers Author
Jess Dickers is a writer for Liberty with more than eight years’ experience in media and publishing. She is passionate about using content to help people get financial. When she’s not writing, you can find Jess planning her next travel adventure or hosting games nights. Jess has a Bachelor of Journalism from Monash University.