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Make your debt repayments more manageable by rolling all of your existing debts into one single debt consolidation personal loan. Compare interest rates, repayments, fees and more.

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What is a debt consolidation personal loan?

A debt consolidation loan is a type of personal loan that allows you to roll multiple debts into one loan, such as from an existing personal loan, car loan, or credit card. This means you have just one loan and one interest rate to budget for, allowing you to pay down your existing debt in a more manageable way. 

How might a debt consolidation loan help?

Paying off multiple debts at once might feel overwhelming, but a debt consolidation personal loan may make it a little easier by streamlining your repayments, simplifying your budgeting, and potentially even saving you money in interest charges.

A debt consolidation loan might be able to help you get your financial situation back on track in more ways than one. For example:

  • Consolidating your debts could help simplify your finances, making budgeting and paying your bills more manageable, and easing pressure on your bank account.
  • Debt consolidation could reduce the stress of managing multiple loan repayments each month, reduce the chance of missing payments, and let you make steady progress towards clearing your debt.
  • By rolling your various loans and/or credit card debts into a single account, you'll only have one set of ongoing fees to pay instead of multiple.
  • Consolidating your existing loans into a personal loan with a lower interest rate could help reduce the interest charges on each repayment (though you could still pay more total interest over a longer term).
  • Consolidating your debt could help you boost your credit score by letting you demonstrate positive credit behaviour over time. This could make it easier to qualify for other loan products in the future.

Are there any risks with debt consolidation personal loans?

Some risks to consider before applying for a debt consolidation personal loan include:

  • If you have a bad credit history, it could be harder to get a debt consolidation loan approved, or you may only be approved for a loan with a high interest rate. While this could still help simplify your budgeting, you may not necessarily save money.
  • If a debt consolidation loan has a longer term than your existing loans, it could end up costing you more. This is because paying a debt over a longer period can mean paying more in total interest charges, even if the interest rate is lower and your monthly repayments are cheaper.
  • If you get access to a higher maximum credit limit with your consolidated loan, you could be tempted to borrow more money and end up deeper in debt. To keep your loan from costing you more, you may want to have your debt consolidation loan cover your existing debts only.
  • A debt consolidation personal loan may not be the cheapest option available to manage your outstanding debts. Consider what other options may be available, such as a balance transfer credit card, to determine which could save you the most.

Can a debt consolidation loan affect your credit score?

Credit products, including debt consolidation loans, generally influence your credit score. Understanding how your credit score could be affected can help you protect your credit file and even help you work towards increasing your score.

How debt consolidation could hurt your credit score

When you apply for a debt consolidation loan, the credit provider will perform a hard enquiry on your credit file before your application is approved. If you have other recent enquiries on your file, then there's a chance your credit score could take a hit

Also, if you close your old credit accounts when you consolidate their debts into a new loan, this could shorten your credit history’s overall length. This could cause your credit score to dip, though this may just be temporary. If the new loan allows you to get on top of your debts and into a better financial position, the potential long-term benefits could outweigh any initial hits to your credit score.

How debt consolidation could improve your credit score

If you diligently make regular repayments on your new loan and consistently pay down your debt, demonstrating positive credit behaviour, your credit score could see an improvement. The introduction of comprehensive credit reporting means both positive and negative information is recorded on your credit file, so increasing the number of positive credit events in your credit history can help improve your score.

Building your credit score back up can help you down the track if you want to apply for other financial products, such as a home loan. Lenders typically offer more competitive interest rates to borrowers with good credit scores, who may also have a higher chance of seeing their loan applications approved.

What types of debt can be consolidated with a personal loan?

There are many different kinds of personal finance debts, and many of these can be rolled into a debt consolidation personal loan. 

Some of the debts you may be able to consolidate include:

  • Credit cards:Whether you have multiple credit cards or just the one, credit card debt is a common candidate for consolidation into a personal loan. Alternatively you could consider a balance transfer.
  • Existing personal loans:You may already be paying back one or more personal loans, with different loan amounts, interest rates and purposes. You could consolidate these loans with other credit products into a new personal loan, or consider refinancing these loans to  low rates instead.
  • Car loans:If you're finding it difficult to juggle your car loan repayments with other types of debt, a debt consolidation loan may help to simplify your finances and potentially save some money. Keep in mind that if your current car loan is secured by the value of your vehicle, it may already have a more competitive interest rate than many unsecured personal loans.
  • Debt collection agency debts:If you owe outstanding bills or fines to a company or organisation, and they have made failed attempts to recover these debts from you, they might be passed on  to a debt collection agency. Some credit providers may allow you to consolidate debts held by debt collection agencies with a personal loan.
Case study: Bella rolls her debts into one

Bella has two credit cards, each with a $2000 balance owing and monthly repayments due at separate times. They both have interest rates of 20%. She also has $5000 left on her car loan that she is paying off monthly with an interest rate of around 8% and 1 year remaining.

Bella has her sights set on a big overseas holiday next year, but wants to be debt-free before she starts to save.

Owing $9000 in debts, Bella could make three separate repayments each month:

  • $183 per month for each credit card ($366 per month combined)
  • $435 per month for the car loan

This costs Bella $801 per month, or $9612 in total after one year. And when you add the $250 in annual fees for the cards and car loan, her total costs add up to $9862.

While Bella could afford all these repayments, she finds it hard to keep track of due dates (increasing her chances of a missed payment) and how much she has paid on each credit product. 

She decides that the easiest way to manage these debts is to roll them all into one personal loan, so she can make one monthly repayment and control the time it takes to repay the debt.

She is offered a $9000 personal loan with an interest rate of around 10% – half of what she’s currently paying on her credit cards – and a 12-month loan term. This would cost her $773 per month, or $9280 in total.

Once her personal loan application has been approved, Bella uses the cash to pay off her credit cards, effectively rolling them into the loan. As her car loan doesn’t allow unlimited extra repayments, Bella must pay a small fee to pay out the loan. But she calculates that the money she can save on annual fees and by paying her car off sooner will make this upfront cost worth it in the long run. 

How do I compare debt consolidation personal loans?

As a debt consolidation loan is a type of personal loan, they have many different features to consider. Carefully comparing each feature can help you find the right debt consolidation loan for your needs, because what’s best for one borrower may not be what’s best for another.

Interest rate

The interest rate will determine how much you pay in interest charges over the life of the loan. A fixed interest rate will stay the same over the loan term, while a variable interest rate can fluctuate with the market. Choosing a fixed rate could mean simpler budgeting and potentially saving some money if variable rates were to rise, but  you could also potentially miss out on some interest savings if the lender was to cut variable interest rates during the term. 

Comparison rate

A lower interest rate doesn’t always mean a cheaper personal loan, because you also need to consider fees. This is where the comparison rate comes in handy, as it combines the loan’s interest rate and main fees, giving you a better idea of its total cost. Remember that there may also be nonstandard fees that aren’t included in the comparison rate.

Secured vs unsecured

A secured personal loan uses an asset, such a car, as collateral for the money borrowed. If you don’t keep up with your repayments, the lender could seize your security instead. 

An unsecured personal loan doesn’t have an asset attached. Secured loans often have lower interest rates than unsecured loans as lenders consider them less risky.

Loan term

The length of time you have to pay off your loan. Personal loans typically have terms of one to five years, but some lenders offer loan terms up to seven years or more. When consolidating existing debts, remember that extending your current loan term could end up costing you more in total interest charges, even if the interest rate is lower.

Extra features

Some personal loans may offer extra features that could affect how you pay off your loan, such as:

  • Extra repayments – One way to pay off your personal loan sooner is to make extra repayments. But while some lenders offer unlimited extra repayments, some may charge a fee, while others may not allow you to make additional repayments at all.
  • Redraw facility – A personal loan with a redraw facility will allow you to 'redraw' extra repayments you’ve previously made, taking the money back out of the loan. This can be handy if you want to pay less interest on your personal loan through extra repayments, but still want access to this money. Not all personal loans come with redraw facilities, and those that do may charge redraw fees.
  • Flexible loan repayments – Some lenders may give you the option to make weekly, fortnightly or monthly repayments, which may better suit some budgets.


The types of fees you may be charged for your personal loan will differ from one lender to the next. Some of these may include:

  • Loan application fees
  • Establishment fees
  • Monthly fees
  • Late payment fees
  • Extra repayment fees
  • Early repayment fees/exit fees
  • Redraw fees

How do I find the best debt consolidation personal loan?

To make your debt consolidation personal loan comparison simpler, RateCity has several useful tools available:

Personal loan comparison tables

RateCity's comparison tables can help you narrow down your personal loan options for debt consolidation. You can use filters to find the loan options that may better suit your needs, such as secured or unsecured loans with fixed or variable interest rates.

Personal loan calculator

RateCity’s personal loan calculator can estimate your repayment costs based on how much you’d like to borrow, your preferred loan term and interest rate. It can also find the total interest payable and total amount payable on your personal loan's full term, which can help you estimate the overall cost of consolidating your debts.

Real Time Ratings™

Real Time Ratings™ is a system that scores personal loans out of five stars, based on their cost (e.g. their interest rates and fees) and flexibility (e.g. approval/funding time, extra repayments, redraw and early exit penalties). Calculated as you use the site so they stay as up to date as possible, these ratings can give you a better idea of each personal loan’s overall value.

How much will a personal loan cost you?

Compare and save using our Personal Loan Calculator

Calculate what your repayments could be on your personal loan.

Tips to avoid adding to existing debt
  • When applying for a debt consolidation personal loan, don't be tempted to borrow more than you already owe. The purpose of a debt consolidation personal loan is to get on top of existing debt, not to add more.
  • Try to avoid continuing to use your old credit cards after you have transferred their balance and paid them off. This could mean having to cover additional credit card bills as well as your new debt consolidation personal loan repayments.
  • Consider any break fees and/or establishment fees you may need to pay when consolidating your debts. If these costs are high, it may be worth paying down your debts individually rather than consolidating. Be sure to make comprehensive calculations before deciding what's right for you.

What are the alternatives to debt consolidation in Australia?

A debt consolidation personal loan can be a helpful tool for some, but there are other options that may be worth exploring. Some of these include:

A balance transfer credit card

Transferring the balance from your existing credit card to a new balance transfer credit card that charges 0% interest gives you an opportunity to clear your debt without interest charges building up. Keep in mind that the no-interest offer is usually only for a limited time before it reverts to an interest rate that’s often higher than average, so you could be charged a lot on any debt that’s left over.

Accessing your home equity

If you have a mortgage, you could consider refinancing your home loan and borrowing more money to cover the cost of your other debts. Alternatively, you could consider borrowing a lump sum with a home equity loan secured by your property, and use this to consolidate your debts. Home loan interest rates are generally lower than most credit cards and personal loans on the market, so you could save money in interest. 

However, home loans typically have longer terms than personal loans, which means you may end up repaying short-term loans over a more extended period. As a result, you may eventually end up paying more in interest charges over time, despite a lower interest rate. Additionally, if you’re unable to manage your debt, there’s a greater risk of losing your home. 


You may be aware that you can refinance a home loan, but did you know you can also refinance a car loan or a personal loan? If you're unhappy with your current loan’s interest rates, fees, or features, you could consider refinancing to a lower rate to save money. Just be sure to check the lending criteria before you begin the application process to ensure you are eligible for your preferred loan, and factor in any early exit fees and the like when making your calculations.

Talk to your credit provider

Consider reaching out to your credit provider to see if you can negotiate a longer loan term, or a different payment schedule, to potentially make your repayments more manageable.

Ask for help

Remember that you can access free financial counselling and advice if you are experiencing financial stress. The National Debt Helpline can help you get your finances back on track, and the National Association of Community Legal Centres are not-for-profit, community-based organisations providing free legal help to those who need it most.

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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