What debt consolidation options are available?

Quick answer: Common debt consolidation options in Australia include personal loans, home loan refinancing and balance transfer credit cards. Using savings to pay down debt may also be worth considering. Which approach may be suitable will depend on your circumstances including the types of debt you have, whether you own a property and your broader financial goals.

Why do people consolidate debt?

Managing multiple repayments across different accounts can sometimes feel difficult to keep track of. For some borrowers, debt consolidation may offer a way to simplify their finances by bringing eligible debts together into one repayment arrangement.

People may consider debt consolidation for a range of reasons, like:

• Simplifying multiple repayments into one

• Creating a clearer repayment strategy

• Reducing the number of accounts to keep track of

• Potentially accessing a lower interest rate

• Improving available cashflow

As every borrower’s situation is different, it’s important to consider your goals and financial circumstances when comparing debt consolidation options.

What debt consolidation options are there?

Consolidating debt with a personal loan

A personal loan could help you consolidate eligible debts such as credit cards, personal loans, Buy Now Pay Later (BNPL) balances and car loans.

Once approved for a debt consolidation personal loan, you’re provided with a lump sum that can be used to pay out existing debts, leaving you with a single repayment and loan schedule to manage.

Interest rates, fees and loan terms vary between lenders, so it’s worth comparing your options before deciding on a solution.

May suit: Borrowers looking to combine multiple unsecured debts into one repayment.

Home loan refinancing

If you’re a homeowner, refinancing may allow you to consolidate multiple debts into your home loan.

Refinancing may be an option for borrowers who have available equity in their property. Equity is the difference between your property’s value and the amount still owing on your home loan.

However, because home loans typically have longer loan terms, it's important to consider the total cost over the life of the loan, not just the repayment amount.

May suit: Homeowners who want to consolidate multiple debts into one loan.

Balance transfer credit cards

Some credit card providers offer balance transfer promotions that allow you to move existing credit card balances to a new card, often at a reduced interest rate for a limited time.

Before applying, it’s important to understand the promotional period, any transfer fees and the ongoing interest rate that may apply once the promotional period ends.

May suit: Borrowers primarily looking to manage credit card debt.