How to consolidate your debt in a personal loan for Christmas

couple figuring out their finances to get a debt consolidation loan

With Christmas around the corner, it’s time to save. By consolidating all your debts into one loan, you can use the interest saved to buy presents for the family!

A debt consolidation loan rolls all your personal debts into one, which means you could benefit from one regular repayment and a lower amount of interest to pay over time. Let’s take a closer look at it.

What debt can I consolidate?

Usually you can consolidate all your debts into a single loan. This might include car loans, credit cards, other personal loans and even buy now pay later purchases. However, you have to keep in mind that lenders have a cap on how much money you can borrow. When looking at lenders make sure they offer enough to cover all your current debts. 

If you have a home loan with a longer loan term than your other debts, consider getting a mortgage refinance. It’s not ideal putting your home loan into a personal loan since home loan rates are currently much lower than those of personal loans.

How do I know if debt consolidation is right for me?

If you are managing multiple debts, there’s a chance you could be missing out on saving money. For instance, if you have high interest credit cards, store cards or even personal loans, they all add up. A personal loan with a much lower interest rate can help. Please keep in mind that if you can keep up with your repayments or are close to paying them off, maybe applying for a consolidation loan might not be for you. Just make sure to check your finances and find what is best for you.

Here’s an example:

This is your debt ($32,000 total):

  • $23,000 car loan at 8.00% interest rate 
  • $5,000 credit card balance at 17.50% interest rate 
  • $4,000 on store card at 20.00% interest rate

Currently, you'd be paying a combined monthly repayment of $1,078 if your debts remained separate. Over three years that would end up costing you $5,892 in interest.

However, if you opted to roll your debt ($32,000) into a debt consolidation loan with an 8.00% interest rate, your repayment would be $1,003. This would mean over three years you'd pay $4,099 in interest - that's a saving of $1,793!

How do I choose a debt consolidation loan?

First you have to decide what type of lender you want to consolidate your debt with. That could be a bank, credit union or peer to peer lenders. You might even find that your own bank offers this type of consolidation service, but before you commit, it could be worth shopping around.

Sometimes some of the more competitive debt consolidation loans are provided by online or small lenders that you may have never heard of before. All the lenders on Mozo’s website are accredited lenders, so you can have full confidence in using our debt consolidation comparison table.

After you find a lender with a good interest rate and borrowing amount that works for you then it is time to apply!

If you want to learn more about personal loans and debt consolidation check out Mozo’s personal loan guides.

Check out some top debt consolidation loans

Now Finance Unsecured Personal Loan
  • 2021 Mozo Expert Choice Award winner^
  • Starting rates from 5.95% p.a. (5.95% p.a. comparison rate*)
  • Borrow from $5,000 up to $50,000

NOW Finance Unsecured Personal Loan is a 2021 Mozo Expert Choice Award^ for best Unsecured Personal Loan. It allows you to borrow from $5,000 to $50,000, making it a good option if you are looking to consolidate your debt. Loan repayment terms start at 2 years with a max of 7 years. Rates start from 5.95% p.a. ( 5.95% p.a. comparison rate*) and NOW Finance doesn’t charge any fees (that’s right, no application fees!). The better your credit rating the more likely you are to receive the low interest rate. This personal loan also has free extra repayments but be aware that there is no redraw facility so you cannot access that money again.

OurMoneyMarket Low Rate Personal Loan
  • 2021 Mozo Expert Choice Award winner^
  • Fixed rates from 5.45% p.a. (6.07% p.a. comparison rate*)
  • Free redraw facility & extra repayments

OurMoneyMarket’s Low Rate Personal Loan is a 2021 Mozo Expert Choice Award^ for best Unsecured Personal Loan. You can borrow over $2,000 and up to $75,000 which might be good if you are looking to consolidate your debts. With a starting fixed rate from 5.45% p.a. (6.07% p.a. comparison rate*), you can get loan terms ranging from 1 to 7 years with free extra repayments, along with free redraws. Keep in mind that there is a $250 application fee and $35 late payment fees that you need to factor into your budget.

Alex Bank Personal Loan
  • 2021 Mozo Expert Choice Award winner^
  • Fixed rates from 4.99% p.a. (4.99% p.a. comparison rate*)
  • Free extra repayments

Alex Bank’s Personal Loan was awarded the Best New Loan Product for 2021 Mozo Expert Choice Award^. It has a low competitive rate starting from 4.99% p.a. (4.99% p.a. comparison rate*) and you can borrow from $2,100 up to $30,000, on a loan term from 1 to 5 years. Although you can make extra free repayments, unfortunately there are no redraw facilities, so if you make lots of extra repayments you can’t get that money back. There is also a $20 late payment fee you need to keep an eye on, so try to stay up to date with your repayments so you can avoid this fee.

Harmoney Unsecured Personal Loan
  • Fixed rates starting from 5.35% p.a. (6.14% p.a. comparison rate*)
  • Borrow from $2,000 up to $50,000
  • Free extra repayments

Harmoney Unsecured Personal Loan starts at 5.35% p.a. (6.14% p.a. comparison rate*) but depending on your credit rating it can climb up to a 19.09% p.a. (19.99% p.a. comparison rate*). Harmoney has a top up feature, which allows you to borrow more on the same loan for a $575 fee. The loan also has a $575 application fee, but if you borrow less than $5,000, the application fee goes down to $200. Loan terms start at 3 years and are up to 5 years, and you can make free extra repayments - but keep in mind that there are no redraw facilities available. Also it has a $15 late repayment fee, so make sure to always make your payments on time.

* WARNING: The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

^See information about the Mozo Experts Choice Personal Loan Awards

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