What is Debt Consolidation?

There are a number of ways to consolidate debts. The basic idea is to replace some or all of your debts with a single debt and one regular repayment. There are also alternatives to Debt Consolidation that provide similar relief for those people who are ineligible for Consolidation Loans.

Why Consolidate Debts?

A single regular payment is often easier to manage and you only need to have dealings with one entity rather than a number of creditors. You could end up paying less due to a lower interest rate.

What types of Debt Consolidation are available?

Unsecured Personal Loan.

Where your debts have a short term or you have Credit Card Debt or other debts with high interest you may be eligible for Debt Consolidation through an unsecured personal loan. The money from the loan is used to pay out your creditors.

The benefit is that the loan would be over a longer term with a relatively low monthly payment. This allows you to pay off the debt within your budget. If you have credit card debts, although you could pay the minimum each month, the interest is likely to be significantly higher than a personal loan. Depending on the difference in interest rate, there may be the benefit of an overall saving as well as being able to better manage a regular monthly payment.


  • To establish a Debt Consolidation loan you need to show a good financial standing: clean credit and a good repayment history on your current loan. If you are behind with you debts or have a debt with a debt collector your chances of getting a personal loan are very slim.
  • Given the current financial markets, Unsecured Personal Loans are becoming increasingly hard to obtain and maximum loan amounts have significantly decreased.
  • There may be exit fees or early exit penalties with your current debts and application fees with the new loan and due to the longer term you may actually end up paying back more than you would have in your current situation.
  • A word of caution: if spending is a problem, you need to take care not to incur more debt. This can easily happen after paying off credit cards and consequently having this amount available again to charge on the card.

Secured loan

There are generally 2 options for a Secured Loan – a mortgage where the loan is secured by your home (Discussed in the Mortgage Refinancing Section) or a small loan secured by other property for example a car, household furniture or appliances.


  • Interest on these loans may not be much lower than your credit cards.
  • Security will be taken over your property. In the event of you defaulting on payments they may foreclose on the collateral so you could lose your vehicle.
  • While Debt Helpline does not provide personal loans we do offer an analysis of your financial situation. If you feel that these are a good option for you contact Debt Helpline for a free phone consultation 1300 802 905

Alternatives to Debt Consolidation

Debt Agreement

If you are ineligible for the options above or they won’t address your problem (too much debt, bad credit or arrears, no security, etc) and you are really struggling with your debts, a Debt Agreement may be an option for you.

For further information, see Debt Agreements.

Debt consolidation can provide more certainty and relief when you are having difficulty handling your debts. It is important though to ensure that the new arrangement is within your means to pay. Be aware that fees and charges may have increased your debt. But don’t forget that the main benefit is having a manageable payment over a longer term. Equally important is to ensure that no further debts are added to the loan. To keep a good hold on your financial management, a budget is a good place to start if you don’t have one.

Bad credit loans

Getting a loan with bad credit requires a borrower to find a lender who is flexible on terms and transparent on rates. People with bad credit often fall victim to predatory lenders that help in the short term but keep them trapped in a cycle of debt that’ll cause harm than good.


  • Bad credit lenders demand high interest rates, often as high as 20%
  • Credit or loan applications could be denied
  • You might not be able to apply for certain jobs
  • Difficulty buying a phone contract, a place to live or even starting your own business

If looking to secure a bad credit loan, make absolutely sure you don’t have any other options. In addition, try boosting your bad credit score before attempting to secure a loan, as it will benefit your financial situation in the long run.