Debt consolidation personal loans

What is a debt consolidation personal loan?

A debt consolidation personal loan pays out several existing debts and replaces them with one loan and one repayment. The debts might be credit cards, store cards, older personal loans, buy-now-pay-later balances or overdue accounts. After consolidation you owe a single lender instead of several.

The attraction is simplicity. One date, one amount and one end point can be easier to manage than five. The risk is that a lower repayment sometimes hides a longer term and a larger total cost, which is why a good consolidation is worked out on paper first.

Ownright Custom Finance, led by director Trevor Scott with more than 40 years in finance, arranges debt consolidation personal loans Australia-wide.

Who suits debt consolidation?

• People paying several debts on different dates with different features
• Borrowers whose combined minimum payments are squeezing the budget
• Those with a steady income who want a defined end date
• Self-employed people tidying up personal and business-related debts
• Applicants who have been declined for consolidation by their usual lender

If the debts are large and you own property, the secured option on our debt consolidation loans page may be worth a read.

When does consolidation help, and when does it not?

Situation	Consolidation may help	Consolidation may not help
Several small debts on different dates	One repayment is simpler	If the new loan costs more overall
High-cost debts	Replacing them with a lower-cost loan may save money	If fees outweigh the savings
Budget under pressure	Lower regular repayment	If it comes from a much longer term
Spending habits	A fresh start	If old accounts remain open and balances regrow
Credit file damage	May rebuild a repayment record	If the loan is hard to carry

MoneySmart makes the same point: the true test is the total cost over the life of the loan compared with what you would pay otherwise.

What do lenders look at for a consolidation loan?

• Income and stability: how regular it is and how it can be shown
• Debts being paid out: balances, limits and account histories
• Living expenses: an honest picture of what you spend
• Credit history: defaults, arrears and enquiries
• Security: whether a vehicle or other asset will support the loan
• Purpose: lenders may require direct payment to creditors

Some lenders insist on paying creditors directly, which keeps the money where it is meant to go.

How does Ownright approach debt consolidation?

We begin with a list. Every card, loan and account goes onto the page, along with balances, limits and repayments. From there we can see whether consolidation improves your position, and by how much.

If it does, we approach lenders suited to your profile. If it does not, we say so, and may suggest alternatives such as contacting creditors about hardship arrangements or speaking with a free financial counsellor. We would rather give you an honest answer than an application that digs you deeper.

Apply online or call our Knoxfield head office on 03 7043 7233.

An illustrative example

Illustrative only: a couple have three credit cards, a car loan and two buy-now-pay-later accounts, with five repayment dates a month. Their income is steady, but a missed payment last year left one default on the file. A mainstream lender declines consolidation.

Ownright would list all debts, check the default is accurate, and see whether a secured loan over their vehicle could widen options. We would compare the total cost against their current arrangement and, if it improves things, approach lenders who accept that profile. They would also be encouraged to reduce card limits afterwards.

Mistakes to avoid

• Focusing only on the lower repayment and ignoring the longer term
• Leaving old cards open and running balances up again
• Missing fees when comparing, including establishment and monthly fees
• Putting a home or car at risk without understanding the consequences
• Using a high-cost short-term loan to “bridge” and compounding the problem
• Not telling the lender about every debt

Documents to have ready

• Photo ID and proof of address
• Recent payslips, or tax returns and BAS if self-employed
• Statements for every debt you want to consolidate
• Bank statements for the last few months
• A rough budget of income and living costs
• Details of any security you may offer

Related options

For general borrowing, see personal loans. If credit history is the main barrier, read bad credit personal loans. Homeowners comparing secured routes can look at consolidating debts with a second mortgage and personal loan vs second mortgage.

How do you compare consolidation against what you have now?

The test is simple in principle. Add up what you would repay in total on your current debts over their remaining life, then compare it with the total on the consolidation loan, including all fees. If the new total is lower, or the repayment is meaningfully easier without a big jump in total cost, consolidation may help.

MoneySmart stresses comparing total cost rather than the repayment alone. A lower weekly or monthly figure can come from stretching the term, and the extra time can add up. Ownright will run this comparison with you for any option we put forward, and if it does not stack up, we will say so.

Which debts are worth consolidating first?

Not every debt needs to go into a consolidation. Debts with high costs, such as credit cards, store cards and some buy-now-pay-later accounts, are the usual candidates. Low-cost debts, or those near the end of their term, may be better left where they are. Debts with large exit fees can also change the calculation.

It helps to list each debt with its balance, repayment, remaining term and any exit costs. Sorting them this way shows which ones are driving the pressure and which are quietly fine.

What if some of the debts are overdue?

Overdue accounts are common among people who consolidate, and they can complicate matters. Some lenders will pay out arrears as part of a consolidation, while others want accounts brought up to date first. Default listings and collection activity add another layer.

If you are behind and under pressure, contacting creditors early can sometimes open hardship arrangements. A free financial counsellor can also talk through the options, and the National Debt Helpline on 1800 007 007 is a good starting point. Ownright can then look at whether a consolidation loan fits what remains.

Secured consolidation: when does it come up?

If unsecured options are limited, a loan secured over a vehicle or property may be considered. It can widen the lender pool and sometimes allows a longer term, but it also puts the asset at risk if repayments fail. For homeowners with larger debts, a loan secured against property is a different product, with its own considerations, covered on our debt consolidation loans page and in the guide on consolidating debts with a second mortgage.

How do you avoid ending up in the same spot?

Consolidation clears the balances but not the habits or events that created them. A few practical steps help the fresh start last:

• Close accounts you no longer need, or reduce their limits
• Set up automatic repayments aligned with your pay dates
• Build a small buffer so a surprise bill does not go on a card
• Review your budget every few months
• Ask for help early if income changes

None of this is a lecture, only a nod to the fact that the best consolidation is one you only need once.

Talk to Ownright about your debts

You do not have to sort it out alone. Send us your details and we will go through your options, honestly and without judgement.