How to use a debt consolidation loan to your advantage in 2023

By Polly Fleeting and Cameron Thomson
Fact Checked
Advertiser disclosure
woman celebrating debt consolidation loan

With interest rate hikes weighing down on borrowers, it’s no wonder people are looking for ways to get their repayments under control. One way of dealing with this is debt consolidation.  

Debt consolidation is a way of compiling all the debt you have (car loan, personal loan, etc.) and could make paying off your debt obligations a lot more simple. After all, one regular payment is much easier to deal with than having to plan around multiple repayments. 

So if you’ve had enough of your current repayment situation, check out the benefits of consolidating your debt in 2023 …

Pay in one regular repayment 

Sick of wasting time and energy on managing your pile of repayment plans? One major benefit of rolling your multiple personal debts into a debt consolidation loan is that you only need to worry about one regular repayment, rather than having to manage and keep track of a few.

This way you can align your loan repayment with your payday: weekly, fortnightly or monthly (depending on what schedule the lender offers). In some cases you may be able to set up an automatic payment whereby on the selected day of each week, fortnight or month your repayment is automatically made from your bank account … simply set and forget. Talk about minimal effort!

Pay less interest 

Another draw card of a debt consolidation loan is that you can actually save on interest by combining your debts. Generally speaking, when you take out this type of loan the interest rate is lower than at least one of your debt types (such as a credit card which may have a higher rate than a personal or car loan). 

Take this example: 

Mario has a $20,000 car loan at 9% interest rate, $5,000 of credit card debt at 22% interest rate and $2,000 store card debt at 18% interest rate. If he were to keep his repayments separate, he’d pay a combined amount of $899 per month. Over three years, this would end up costing him a total of $5,373 in interest. 

On the other hand, if Mario took out a $27,000 debt consolidation loan (his combined debts) with an interest rate of 8.00% his monthly repayment would drop to $846. This means, Mario would pay $3,459 in interest over the same three-year period and end up saving $1,914 in interest payments. 

Pay fewer fees 

Fees aren’t fun. But the good news is, debt consolidation can help you dodge them by focusing on just one repayment. 

When you have multiple personal debts, chances are you are being charged a range of fees on each product. For example, you may be forking out an annual fee on your credit card, monthly keeping fees on your loan or even additional costs for making extra repayments. 

So when it comes to your debt consolidation loan, use the opportunity to say goodbye to as many fees as you can and reduce what you pay on the loan itself. That’s not to say that you won’t pay any fees at all, but keep an eye out for costs like upfront establishment fees, ongoing service charges and early repayment costs. The fewer you pay, the better. 

Pay your debt off sooner

If your multiple debts feel like a never ending cycle of repayments, a debt consolidation loan can allow you to pay off what you owe sooner. 

As mentioned, with this type of loan you could save on the amount of interest you pay. This means, by paying less interest you can free up more cash to go towards paying off your loan amount. 

On that note, an important feature to look for when choosing a debt consolidation loan is the ability to make free extra repayments. This allows you to make additional contributions towards your debt on top of your regular repayments. Also try and choose a loan that doesn’t charge an early repayment penalty when you pay off your loan in full ahead of time. That way once your debt is cleared, you simply walk away (at no extra cost to you). 

If you want to start comparing debt consolidation loans right now, take a look at the options below or head over to our personal loan hub for more!

Compare debt consolidation loans - last updated 9 December 2023

Search promoted personal loans below or do a full Mozo database search . Advertiser disclosure
  • Debt Consolidation Loan

    interest rate
    comparison rate
    Monthly repayment
    6.57% p.a.to 8.48% p.a.
    7.19% p.a.to 8.84% p.a.based on $30,000
    over 5 years

    Competitive fixed rates on loans up to $75,000 depending on your credit score. Zero monthly account keeping fees, no exit fees and no early repayment fees. Make weekly, fortnightly or monthly repayments, over 1 to 7 years managed entirely online, at any time. Fast and easy, 100% online application.

    Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 6.57% would cost $35,528.12 including fees.

    Go to site
    Details
  • Mozo Expert Choice Badge
    Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    6.75% p.a.to 26.95% p.a.
    6.75% p.a.to 26.95% p.a.based on $30,000
    over 5 years

    Borrow up to $50,000 unsecured. Perfect if you earn more than $22,100 p.a. and have good to excellent credit. Multi-year winner of Mozo’s Experts Choice Unsecured Personal Loan Award, 2021, 2022, 2023 & 2024^'

    Repayment terms from 2 years to 7 years. Representative example: a 5 year $30,000 loan at 6.75% would cost $35,430.23 including fees.

    Go to site
    Details
  • Debt Consolidation Loan

    interest rate
    comparison rate
    Monthly repayment
    5.86% p.a.
    6.67% p.a.based on $30,000
    over 5 years

    Roll multiple debts into one loan to streamline your finances with one set of repayments and one interest rate. Competitive fixed interest rates with no monthly or early repayment fees and flexible repayment options. Easy online application and funding in as little as 24 hours (subject to approval).

    Repayment terms from 3 years to 7 years. Representative example: a 5 year $30,000 loan at 5.86% would cost $35,256.99 including fees.

    Go to site
    Details
  • Personal Loan

    Unsecured, Fixed, Exceptional Credit

    interest rate
    comparison rate
    Monthly repayment
    6.57% p.a.
    6.57% p.a.based on $10,000
    over 3 years

    Borrow from $5,000 to $50,000 with a Plenti Unsecured Personal Loan. Flexible loan terms of 1 - 7 years. $0 Monthly, $0 Early Repayment Fees and $0 Exit Fees. Get a rate estimate without impacting your credit score. Once approved, you could receive your funds in as little as 24hrs.

    Repayment terms from 3 years to 7 years. Representative example: a 3 year $10,000 loan at 6.57% would cost $11,340.11 including fees.

    Go to site
    Details
  • Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    5.76% p.a.to 24.03% p.a.
    6.55% p.a.to 24.98% p.a.based on $30,000
    over 5 years

    Fast, easy and 100% online, this is a low cost loan with no ongoing fees or extra repayment penalties. It's perfect for savvy borrowers with great credit. If you’re over 18 and earn above $30,000, you could qualify (other eligibility criteria may apply).

    Repayment terms from 3 years to 7 years. Representative example: a 5 year $30,000 loan at 5.76% would cost $35,173.52 including fees.

    Go to site
    Details

* 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

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.