Simply your repayments and outstanding debt amounts into one place with a personal loan for debt consolidation.

It’s not uncommon for the average Australian to have to take out multiple loans at a time to finance personal and work commitments, from credit card debts to car loans, and even a personal loan for a vacation. Debt consolidation can bring all the existing debts under one new loan for borrowers to keep track of and simplify financial commitments.

Let’s say you have an outstanding personal loan of $4,000, and a credit card debt of $5,000. Each of these debts will have its own interest rate and repayments, which can be difficult to keep track of. When you take out a loan for debt consolidation, you can borrow funds for $9,000 to pay off these two debts, leaving you with a single loan and a single set of repayments. 

This new loan for debt consolidation can even have a lower interest rate compared to your existing loans — meaning that you could save some of the cost of interest in the process (but this is also dependent on the length of the new loan term).

When should you consider debt consolidation?

Debt consolidation is a useful financial tool to simplify debt, but it is not suitable for every financial situation.

Some loans may incur additional fees (known as an exit fee) when you choose to repay the loan completely before the end of the loan term. There are also other fees that may apply to the new loan for application or valuation.

Before you decide to take out a loan for debt consolidation, make a list of these potential costs and compare them with the potential savings for going ahead with debt consolidation — if you find that applying for the new loan is more expensive, it may not be worth consolidation. It’s important to work with a broker to determine suitability and benefits of debt consolidation.

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