How do debt consolidation loans work?
Debt consolidation loans pay out what you owe elsewhere and replace it with one new loan. The lender either pays your old creditors directly or pays you so you can pay off credit card debt and other balances straight away. From then on, it’s one repayment, on one date, until the loan is gone.
- 1
List what you owe
Every card, store card, buy now pay later plan and loan — balances and due dates.
- 2
We find the fit
We search 60+ lenders for a loan that covers the total with repayments you can live with.
- 3
Old debts are paid out
Once approved, the balances are cleared, often directly by the lender.
- 4
One repayment from here
Set it to come out when you’re paid, and watch the balance fall towards a fixed finish date.
What does debt consolidation look like in real life?
Here’s a simple illustration of the juggle — and the calm afterwards. It’s about simplicity and a finish line, not rates.
| Debt | Balance | When it’s due | How it feels |
|---|---|---|---|
| Credit card | $8,600 | The 3rd of each month | The minimum barely dents it |
| Store card | $2,400 | The 17th | Easy to forget until the late fee lands |
| Buy now pay later (three plans) | $1,350 | Different fortnights for each | Three apps, three reminders |
| After: one consolidation loan | $12,350 | Once, on the day you’re paid | One number, one date, a set finish |
Is debt consolidation a good idea?
It’s a good idea when it makes your debts simpler and cheaper to clear, and you’re ready to keep the old balances from creeping back.
- Pro: one repayment and one due date, so fewer missed payments.
- Pro: a fixed end date instead of open-ended card minimums.
- Pro: it may lower your overall interest if the new loan costs less than your cards.
- Con: a longer term can mean more interest in total, even with smaller repayments.
- Con: fees on the new loan, or exit fees on old ones, can eat into the saving.
- Con: it only works if the paid-off cards stay paid off.
Can I consolidate credit card and buy now pay later debts?
Yes — plenty of people use one loan to consolidate credit card debt, store cards and buy now pay later balances together. Buy now pay later has been regulated as credit since 10 June 2025, so it’s worth treating those small instalments like the real debts they are.
Consolidate debt into my mortgage or a personal loan?
Homeowners with equity can use a home loan refinance to roll debts into the mortgage, sometimes at a lower rate. The catch is time: spread a short-term debt over a long mortgage and you can pay more interest overall.
| Personal loan | Mortgage refinance | |
|---|---|---|
| Security | Usually unsecured | Your home |
| Term | A few years, with a set end date | Often decades |
| Repayments | Higher, but finished sooner | Smaller, spread over a long time |
| Total interest | Contained by the shorter term | Can end up higher unless you pay extra |
| Best for | Clearing debts fast | Homeowners with equity who’ll pay it down quickly |
What you’ll need
- A list of every debt: who it’s with, the balance and the limit
- Payout figures for existing loans (we can help you request them)
- Recent payslips or other proof of income
- Recent bank statements
- Photo ID
- A rough monthly budget
Who it usually suits
- Steady income that comfortably covers the new repayment
- Aged 18+ and an Australian citizen or permanent resident (visa holders case by case)
- A loan amount that clears the debts you’re consolidating
- A plan to keep paid-off cards closed or at zero
- Less-than-perfect credit can still be considered by some lenders
