Debt consolidation loans

Do you have multiple debts that you find difficult to manage, particularly if there is some high-interest debt in the mix? A debt consolidation loan could be the answer in your situation, and you can compare your options here.

By   |   Updated 14th May 2020

Comparing debt consolidation loans for $30,000.00 over 5 years

MoneyPlace Excellent Credit

On MoneyPlace's website

MoneyPlace Excellent Credit

Interest rate

From 7.65% (personalised)

Comparison rate

7.65%

Repayment period

5 years

Application fee

$0.00

Monthly repayment

$603.28

Total repayment

$36,196.80

Highlights

  • No hassle, 100% online. 10 min application. Get your money in <24 hours
ANZ Fixed Rate Personal Loan

On ANZ's website

ANZ Fixed Rate Personal Loan

Interest rate

12.45%

Comparison rate

13.32%

Repayment period

5 years

Application fee

$150.00

Monthly repayment

$677.55

Total repayment

$40,653.00

Highlights

  • Get a fixed rate of 12.45% p.a.
  • Log on to ANZ Internet Banking to see your balance, repayments, interest paid and details about your next payment.
WISR Unsecured Personal Loans

On Wisr's website

WISR Unsecured Personal Loans

Interest rate

From 7.95% (personalised)

Comparison rate

8.78%

Repayment period

5 years

Application fee

$595.00

Monthly repayment

$619.62

Total repayment

$37,177.20

Highlights

  • Personalised low rates based on your credit score
  • Borrow between $5,000 - $50,000
  • Quick rate estimate that won’t impact your credit score
MoneyPlace Very Good Credit

On MoneyPlace's website

MoneyPlace Very Good Credit

Interest rate

From 10.99% (personalised)

Comparison rate

13.11%

Repayment period

5 years

Application fee

$300.00

Monthly repayment

$658.64

Total repayment

$39,518.40

Highlights

  • No hassle, 100% online. 10 min application. Get your money in <24 hours
MoneyPlace Good Credit

On MoneyPlace's website

MoneyPlace Good Credit

Interest rate

From 13.79% (personalised)

Comparison rate

17.06%

Repayment period

5 years

Application fee

$300.00

Monthly repayment

$701.73

Total repayment

$42,103.80

Highlights

  • No hassle, 100% online. 10 min application. Get your money in <24 hours

Learn about debt consolidation loans

Got questions about how to consolidate your debt? Our team share their top tips.

  • FAQs

Are there any drawbacks to a debt consolidation loan?

If you take out a debt consolidation loan you may be stretching out your repayment period into 3-5 years, which means that your total interest cost will be greater than if you paid off your debt within a shorter time frame. But a longer repayment period means that your monthly repayments will be lower and will more easily fit into your budget.

Your existing loans may have high break fees for early repayment if they have a fixed interest rate. Check the amounts of any likely early exit fees before you commit to a debt consolidation loan.

If you choose a secured loan (which usually has a lower interest rate) you risk losing the asset you offered as collateral if you default on the loan.

Also, you’ll probably need to exert more discipline over your financial habits and resist the temptation to spend more. Learn to avoid the problems that got you into debt in the first place, otherwise you may just end up deeper in debt.

How long is the loan term for a debt consolidation loan?

You will usually be able to choose your loan term. A typical term would be between three and five years, but loan terms of 1-7 years are usually available. Bear in mind that the longer the term, the more you will pay in interest overall, and the shorter the term, the higher your monthly repayments will be.

How much can I borrow via a debt consolidation loan?

This will depend on your credit score and your income, but a typical debt consolidation loan amount would be $10,000-$20,000.

How often will I need to make repayments on a debt consolidation loan?

Monthly repayments are the norm, but you may be able to choose weekly or fortnightly repayments. The more frequently you repay, the lower your overall interest cost will be.

How will a debt consolidation loan affect my credit rating?

First of all, the loan application will appear in your credit history file as an enquiry and then as an approval, both of which will have a slight downward impact on your credit score. But if you keep up with repayments, always paying the required amount on time, your credit score will recover, and will certainly end up being better than it was if you were unable to cope with the multiple debts you previously had.

On the other hand, if you don’t handle your debt consolidation loan responsibly, missing repayments, paying less than you should or paying late, you will damage your credit score even further.

What fees are associated with a debt consolidation loan?

You need to check for the following fees when comparing loans, since they will vary depending on the lender and the loan product:

  • Application fee, only payable if your loan is approved
  • Monthly or annual account-keeping or administration fee
  • Late payment fee, if you don’t make the required periodic repayment on time
  • Break fee, usually payable if you want to exit a fixed rate loan early

One way to compare these costs is to look at the comparison interest rate, which builds in the effect of unavoidable loan fees. But bear in mind that the comparison rate is only a guide, and odes not include the effect of every fee you could be faced with.

What is a debt consolidation loan?

It’s a type of personal loan used to convert a number of different loans an individual may have, into a single loan. The funds advanced by a lender for a new debt consolidation loan are used to repay the remaining principal and any early exit fees on the existing loans, so that only a single, manageable loan remains.

What kinds of debt consolidation loan are available?

As with most personal loans, there are four main loan features to consider:

  • Secured loan, where the lender takes a charge over an asset belonging to the lender (e.g. a car or a house) as security (collateral), usually offering a lower interest rate in return. But the lender could repossess your asset to recover the loan principal and costs if you default on the loan.
  • Unsecured loan, the most common type of debt consolidation loan, where the borrower offers no collateral, usually resulting in a higher interest rate and fees.
  • Fixed interest rate, meaning that the interest rate will not change during the life of the loan. This makes monthly repayments easier to budget for, but you will probably be unable to make extra repayments to clear your debt faster, and you could face high break fees if you do try to repay early.
  • Variable interest rate, which means that the rate could go up or down at any time. It makes planning your finances more difficult, especially if interest rates go up, but variable interest rates tend to be lower than fixed rates at the beginning of the loan. Variable rate loans are also generally more flexible regarding fees, extra repayments and early discharge of the loan.

Why should I consider a debt consolidation loan?

There are two main reasons.

You may have already have a number of personal loans and credit card debts (for a car, say, plus a student loan, a credit card debt and a store card debt) with different repayment dates and amounts that are a nuisance to manage. It can also be difficult to decide which debt to concentrate on repaying first. You could eliminate a lot of hassle and save on multiple annual fees and monthly account-keeping fees by converting them into a single loan.

But by far the most common reason for taking out a debt consolidation loan is to reduce your dependence on high-interest credit card debt and get your finances back on track. You could use the debt consolidation loan to pay off credit card debt and any other personal loans, and end up with an overall interest rate that is much lower than the one you were previously paying.

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