BSB 806 015

To give you the best possible experience, this site uses cookies. Learn more about cookies.

BSB 806 015

Consolidate your debts

Step 1: Review your current debts

Between home loans, car loans, credit cards and personal loans, Australians are now living with more debt than ever.

On average, household debt is now equal to nearly 18 months annual salary. The interest rates you’ll pay on that debt can vary on your mortgage and credit cards.

When you take out loans to pay for large purchases, it's easy for the all the payments to add up. Before long, you could find yourself repaying multiple creditors each month, but what if there's a better way? 

If you're wondering how to manage your debts more effectively, a debt consolidation loan might be worth looking into. It can be a great option because the lower the interest rate you’re paying, the quicker you’ll be able to get on top of your debts.

Here's everything you should know about these loans and some tips for deciding whether they could potentially help you to clear your debts quicker. 

What are debt consolidation loans?

Put simply, a debt consolidation loan often lets you combine all your personal debts into a single personal loan so you’re left with just one repayment a month, and the aim is to shift this loan to the lowest interest rate possible. First, you use the funds from the loan to pay off all your debts, and then you repay the new loan by following the set repayment schedule. By only having to maintain repayments with one creditor, you avoid the hassle of having to make repayments to multiple financial institutions or loan accounts, therefore reducing some of the stress that can be associated with this.

Debt consolidation loans are a very attractive way to handle numerous debts, so long as you have the money to meet the repayments.

Step 2: Find out which ones you can consolidate

If you’re considering a debt consolidation loan, review your current situation. Look at the loans and credit cards you currently hold, as well as the interest rate attached to each and how much you’re repaying each month.

Here are some examples of debt which you might consider consolidating:

  • Credit card debt
  • Medical bills
  • Holiday loans and other personal loans

Debt consolidation loans don't require security. You can consolidate most unsecured loans, meaning loans that aren't secured against assets such as your car or home. However, it's possible to secure a consolidation loan if you have a car that fits the required conditions or there's enough equity in your home. Your lender will consider the asset and decide if it's willing to accept it as security. 

If you're unsure about whether a loan or debt can be consolidated, it’s always best to speak with a lender.

Step 3: Decide if a debt consolidation loan is right for you

As sensible as debt consolidation sounds, it’s not for everyone. If you know you’ll use your now paid off credit card to accumulate more debt, you could find yourself in a worse situation than before.

Whether debt consolidation is right for you is largely a personal decision, but here are some factors to consider. 

  • If you're struggling with a poor credit history, it's probably best to see if you can arrange realistic repayment plans with individual creditors. 
  • Consolidation loans only work properly if you stop relying on credit going forward. If you pay off a debt consolidation loan and then find yourself taking out multiple debts all over again, you may end up in the same financial position that you started in.
  • If you have multiple loans with varying interest rates, it makes sense to streamline these loan repayments into one simple repayment at an interest rate that you can keep a track of. Debt consolidation loans work well in these circumstances.

You may also want to investigate if your current lenders charge a fee if you pay off your loan early. A personal loans calculator can help you figure out if the benefits outweigh the potential fees and expenses. 

Step 4: Weigh up the pros and cons

Like any debt management tool, debt consolidation loans have pros and cons associated with them. 


  • Consolidation loans simplify the repayment process, so it can be more manageable.
  • You're less likely to overlook or miss payments if you're only dealing with one repayment, rather than multiple repayments.
  • If you're paying off high-interest debts, for example, credit card debts, a consolidation loan with a lower interest rate could mean you'll pay less interest over the long term. 
  • They can reduce your admin burden.


  • Debt consolidation loans don't reduce your debt. You just make one repayment at one interest rate instead of multiple smaller repayments. 
  • Some personal loans may have higher interest rates than the current debts you're paying off, which is why it's so important to shop around before committing. 
  • You may not qualify if you have a poor credit history.

Step 5: & get professional advice

This is where the power of & really comes into play. You don’t have to deal with your debt problem all by yourself, and as with all financial decisions, deciding between debt consolidation loans or repaying your current debts individually is a personal choice dependent on various factors.

We can help you crunch the numbers to work out the total costs of debt consolidation and suggest the best options that may help you move forward. 

For great rates and terms on secured and unsecured personal loans designed for debt consolidation, chat online now, or drop into your nearest P&N Bank branch.

We'd like to use your current location

For a more localised experience please enter your location below...


Set your location for a more localised experience.