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Can a personal loan help with consolidating my debt?

If you’re juggling multiple debts, consolidating some of those debts with a personal loan could help make them easier to manage by rolling them up into a single loan with one set of regular repayments, be it at a fixed or variable rate.

Examples of the types of debts that can be consolidated with an ANZ Personal Loan include credit cards, car finance, other personal loans, outstanding tax debt, store cards, and hire purchase instalment plans.

Debt consolidation with a personal loan could help you save on fees and charges, potentially give you a lower overall interest rate, simplify your payment arrangements and help you stay in control of your debt. However, this will depend on your current financial circumstances, as well as the terms, fees, charges and rates that apply on your existing debt arrangements and the options being considered.

Whether this type of debt management suits you will really come down to your own personal situation, as it’s not a one-size-fits-all solution.

Here we’ll help to unpack:

  • How debt consolidation with a personal loan works;
  • Possible benefits of debt consolidation with a personal loan;
  • Some things you might need to consider; and
  • Where to from here.

How debt consolidation with a personal loan works

One way to consolidate existing debts is to take out a single personal loan to cover the repayment requirements of those debts.

Let's take a look at one example of how debt consolidation may work:

  • You have two different credit card debts at different interest rates;
  • You apply to take out a personal loan;
  • If approved, you use the funds from this personal loan to pay off your existing credit card debts; and
  • You then repay that single personal loan back over an agreed term.

Possible benefits of consolidating with a personal loan

Your payments in one place

Juggling multiple repayments for different debts, often with different lenders, at different times of the month can be stressful. An option that can be considered is consolidating those debts by applying for a personal loan and, if approved, using the funds from this loan to pay off your other existing debts, and then repaying your personal loan back over a set term.

In many cases, if you consolidate debts with an ANZ Personal Loan, ANZ will be able to disperse the loan funds directly to other lenders on your behalf to pay off your other debts. So, it can help lift that weight off your shoulders. However, you will be responsible for the cancellation of any accounts that you no longer need and payment of any outstanding fees.

Going forward it means that instead of multiple payments, you may only have one set of regular repayments to make, which may give you more control over your cash flow as a result.

Less fees and charges (depending on your circumstances)

By consolidating your debts with a personal loan, you might also be able to save on administration or other fees and charges, as well as potentially getting a lower overall interest rate (if, say, the interest rate on a personal loan is lower than the interest rates on your existing credit cards). This will depend on the terms, fees, charges and rates that apply to your existing debts and the loan with which you're considering to consolidate your debt.

You should also check for any contract breaking costs that might be applicable if you end your existing debt arrangements.

It may give you a strategy, and a finish line

Consolidating your debts into a personal loan may give you a clearer timeline to the day you can pay off your debt. Rather than juggling different arrangements, debt consolidation may result in one payment arrangement with one lender and one finish line. This might help give you back a sense of control.

If you’re unsure how much you could borrow, or how much your personal loan repayments are likely to be, our calculators might be helpful.

See how much you could potentially borrow

See what your repayments might be

Some things you might need to consider

Beware of increasing your debt

It’s a good idea to work out exactly what you owe across the debts that you want to consolidate so that you understand how much you need to borrow. If you take out a loan that is bigger than the total amount of those existing debts, then the loan will just become an additional debt. Being honest with yourself about what is achievable and reasonable and understanding what you're hoping to achieve is key.

It might not be the most effective option for you

Determining whether this is the right approach will come down to assessing your own financial situation and the options available.

The way you organise your debt, the amounts you owe and the various fees, charges, rates, terms and conditions that apply to your existing debt are some of the factors to consider. If you’re uncertain about whether debt consolidation with a personal loan is appropriate for you or your personal circumstances, you should consider seeking the advice of an appropriately qualified financial, or other professional adviser.

Simplicity may not be worth additional costs

Depending on your circumstances, it might not make sense to consolidate debts to a personal loan that has a higher interest rate than your existing debts, or with higher fees and charges. It’s a good idea to take into consideration the overall costs of what you’re considering and compare them to your current arrangements.

Where to from here

If you’re considering debt consolidation, have a look at our debt consolidation page to learn a little more about possible options that may suit you.

You can also speak to one of our loan specialists:

  • Speak to a loan specialist on 1800 519 708 (Mon-Fri 8am-8pm AEST)  
  • General Personal Loan Enquiries 1800 801 485  (Mon-Fri 8am-8pm AEST)
  • Or use our branch locator to find your nearest branch   

If you’re currently facing financial hardship, you can visit our financial assistance hub to see what options might be available to you.

The information on this page refers to personal loans, is general in nature only and does not take into account your personal objectives, financial situation or needs and you should consider whether it is right for you. 

By providing this information ANZ does not intend to provide any financial advice or other advice or recommendations. You should seek independent financial, legal, tax and other relevant advice having regard to your particular circumstances.

The information is current as at 24 November 2020 and may be subject to change.

All applications for credit are subject to ANZ’s credit assessment criteria. Terms and conditions are available on application. Fees and charges apply. Australian credit licence number 234527.