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Did you know you can compare 100’s personal loans? Browse, filter and compare on our main personal loans comparison page.
What exactly is debt consolidation?
Debt consolidation incorporates or consolidates all your current debts under one loan. It can help you manage your repayments more efficiently and may save you money if you find a debt consolidation loan with a better interest rate. Whether you find a more competitive personal loan can mean savings hundreds if not thousands of dollars in interest repayments. This means it’s important to carefully consider the interest rates and fees of a debt consolidation loan offer before refinancing.
Things to think about before refinancing with debt consolidation loans
If you do find a great offer and have checked it out properly, debt consolidation loans can be an effective way to reduce your interest payments and fees.
Before you consolidate your debt:
- Think about changing home loans. This may help you cut the costs of fees and interest payments, but again it’s important to check carefully first that the deal is genuinely better
- Speak with your lender. Sometimes, your existing loan provider may be able to help you amend your repayment plan or give you more time to pay off your loan
- Apply for a balance transfer on your credit card. Balance transfers are often not a bad way to gain more control over your debts. It’s also the case that they might put you under more financial pressure, so think about these carefully
Where to find free debt consolidation support
Aussies have several good sources of advice and support available if we need help getting our finances back on track. If you find yourself needing help in this area, it’s possible to consult:
- A financial counsellor. These advisors can assist in organising your money, and may even be able to negotiate debts with your lenders
- Ombudsman services. When negotiations with your credit provider seem to be a little off in terms of fairness and transparency, you can complain for free to an ombudsman. During the time that the ombudsman processes your complaint, your credit provider may not initiate or pursue legal action against you. If however, a court has already ruled on your case, an ombudsman is no longer in a position to help you
- Free legal advice. Legal Aid offices and legal centres exist in all states, and can offer legal advice for free on your outstanding debts
Key things to remember when consolidating debt
It’s best not to commit to any debt consolidation loans before you’ve:
- Compared fees, penalties and interest rates, as these will determine how much your new personal loan will cost you in total. Make sure that you’ll not be paying more in the end by looking carefully at things like application fees, monthly fees and the comparison interest rate.
- Check the debt consolidation loan terms while keeping in mind that longer loans mean smaller repayments, but more interest charges overall
Compare and review debt consolidation personal loan rates
Debt consolidation loans or refinancing are not new and streamlining loans, credit cards or other debts into one manageable payment is an option for many people.
What type of debt consolidation personal loans are on offer?
Secured debt consolidation loans use an asset you own as collateral. If you are unable to repay the loan, the lender can then repossess and sell the asset to recoup some or all of the losses from the unpaid loan. If you own a car, property, term deposit or some other valuable asset, you will likely be offered a lower interest rate in exchange for offering it as collateral. You could potentially borrow a larger sum of money if you offer security and meet the lending criteria.
Unsecured debt consolidation loans are loans where you do not put up an asset as collateral. Unsecured loans are higher risk for the lenders, because if you default on the loan, there’s a reduced possibly to recoup the loan. These types of loans come with a higher interest rate, reflecting the greater risk.
What’s the deal with fixed and variable interest rates?
Sometimes, nothing. Though other times, it impacts:
- the maximum term of the loan;
- the maximum amount you can borrow;
- the interest rate; and
- whether the loan includes a redraw facility or allows you to repay early without incurring a penalty fee.
Fixed interest rates will not change over the life of the loan, which makes it easier to budget. By agreeing to a fixed interest rate for the life of the loan, there is no risk that you will miss payments if the interest rate increased. On the flipside, if there is an interest rate cut in the future, you will miss out on any possible savings. Some lenders may not include a redraw facility on fixed rate loans or will include an early repayment fee.
Variable interest rates may rise and fall throughout the life of your loan. This could potentially mean that you will save money in the future if interest rates fall, but if interest rates rise in the future, it could become difficult to continue to meet the monthly premiums. Variable interest rate debt consolidation personal loans tend to be more flexible for payment terms than fixed rate loans, which gives you more options to manage your finances and tailor your payments to work for you.
Do you have a debt consolidation loans repayment calculator?
Yes. Use the filter to adjust your loan amount and term duration to calculate your approximate monthly repayments. When you apply the filter, you will see a breakdown of your approximate monthly repayments as well as the total amount of interest and fees paid.
How to apply for a debt consolidation loan ?
If you’d like to apply online for a debt consolidation loan, just scroll up and click on “GO TO SITE” to be taken to a secure online application form. Before you apply, be sure to learn about the lender’s fees and eligibility criteria. The ease of application varies between lenders, so give yourself around 30 minutes to complete the application.
What is the eligibility criteria?
Before you apply for a debt consolidation loan, be sure to understand and meet the lender’s lending criteria. Below is a high-level overview of eligibility criteria that may impact your chances of being approved for a personal loan:
Minimum requirements for a debt consolidation loan
- Minimum age: Range is between 18-21 years of age
- Minimum income: Range is between $15,000 and $50,000
- Employment status: This varies between lenders, some lender will lend to those on a pension or on benefits, whilst others require that you’re regularly employed
- Residency: (Most lenders require you to be an Australian citizen, permanent resident or have a valid visa). A handful of lender allow 457 visa holders to apply
- Credit score: Some lenders vary their interest rates based on whether you have an excellent, good, average or below average credit score
- Affordability: Lenders will look at your current income minus your outgoing expenses to determine if you have enough left over to repay the amount you wish to borrow
How much can you borrow?
This will depend greatly on your eligibility criteria. We strongly recommend reading this blog on how much you can borrow and whether or not you will be approved.
Information you’ll need to provide
Whether at the branch or online, make sure to have the following nearby:
- Proof of income: A verifiable and steady employment. You may be required to provide copies of your most recent pay slips and employer’s contact information
- A list of your assets, expenses and liabilities
- Identification Documents: Driver’s licence (if you have one) or other forms of ID
- Recent bank statements, going up to 3 months back
Are you self-employed?
If you’re self-employed, you will also need to provide:
- Financial statements for the last year (no older than 18 months)
- Your most recent personal/business tax return (no older than 18 months)
Other things to keeping mind when applying for a personal loan
- It’s advantageous to have a good credit history. For example, you have no recent defaults and no frequent requests for credit.
- Credit cards with large credit limits are seen as liabilities, even if there’s nothing owing. If you have existing liabilities, be certain you can pay them off in addition to your debt consolidation personal loan.
There are many additional factors to consider when completing your application, but the above are the most important. If you feel like you may not meet the lender’s eligibility criteria, it may be best to save!
Additional product information
Minimum and maximum debt consolidation loan amounts and terms
Minimum and maximum loan terms and amounts vary between lenders. We strongly recommend you use the filter to determine the most appropriate lender for you. Most common minimum loan amounts start from $5,000 with maximum terms up to $100,000. However, most lenders will not provide unsecured debt consolidation personal loans beyond $50,000.
Terms range from 6 months to 10 years, with most common terms ranging between 2 and 5 years. You should however check the minimum and maximum term ranges for your preferred lender before applying.
It’s also worth checking to see if there are early repayment fees.
Most lenders allow weekly, fortnightly or monthly repayment. However, some peer-to-peer lenders only allow monthly repayments.
Extra repayment or early penalties
All lenders allow you to repay off your debt consolidation loan early, however – you should check each product for any potential early repayment fees.
Not all lenders allow you to redraw on your repayments. Some lenders only allow you to redraw on additional repayments you’ve made, whilst other do not allow redraw at all. Often (but not always) you will find fixed debt consolidation personal loans will not allow redraw, but offer a lower rate, whilst variable rate debt consolidation personal loans may allow you to redraw additional repayments you have made, but may also charge a higher interest rate.