Australians are getting their finances in order - can a debt consolidation loan help you do the same?

Woman sits on floor on laptop considering a debt consolidation loan for the new financial year

We all know that debt happens, but getting debt under control is a whole different ball game. New information from the Commonwealth Bank and Melbourne Institute: Applied Economic & Social Research shows that financial wellbeing scores are substantially higher than they were prior to the COVID-19 pandemic. 

If you’re keen to join the crowd and start taking charge of your finances, a consolidation loan might be the way to get a head start on the new financial year.

If I’m in debt, how will one more loan help?

Taking out one larger personal loan as a way of consolidating existing debt can be an effective way of redirecting your financial focus.

Consider your current debts. You might have taken out a car loan to buy your current set of wheels, and have a credit card needing regular repayment. Factor in Buy Now Pay Later instalments and it can feel like life is a constant cycle of repayment after repayment! 

A debt consolidation loan essentially rolls up these smaller debts into a singular sum, allowing you to pay off outstanding sums. Rather than owing varying amounts to varying places on different repayment schedules, there are some advantages to pooling your debts together.

By moving that debt into one place, you can gain a greater level of control over your repayment schedule and the rate of interest you are paying back. A single repayment schedule is helpful for avoiding late fees, as well as minimising individual fees on each product. 

You can also lock in a singular interest rate instead of being at the mercy of multiple rates, avoiding the sting of, say, that one store credit card with an especially high interest rate. Look for a debt consolidation loan with a lower interest rate to pay less over time - we have a handy comparison tool to help you search for the right one for you.

Is there anything to watch out for when consolidating my debt?

Nothing is ever as straightforward as it seems! While a debt consolidation loan can help to bring all of your debt into one place, it can also have drawbacks.

If any of your existing debt is fixed on a low interest rate, it can be entirely possible to get stuck paying back a higher interest rate than you initially borrowed at. Similarly, if you are close to paying off an existing loan, using a debt consolidation loan to pay it back can set you up for a much more extended (and expensive!) repayment period.

It’s also important not to use a debt consolidation loan on the wrong things - for example, a home loan. The extended life of a mortgage is far greater than the term of most personal loans, and will create drawn out debt and higher interest in the long run.


Decided to take out a debt consolidation loan? Take a look at our guide on the dos and don’ts to ensure smooth sailing.

Debt consolidation loans - last updated 25 June 2022

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