A debt consolidation loan is simply a personal loan used to clear one or more outstanding debts. It’s one of the most common uses for a personal loan in Australia. There are plenty of reasons why one of these loans could be the right move for you, from saving money to simplifying your debt structure.
What is debt consolidation and how does it work?
Debt consolidation is a straightforward process: it involves taking out a loan to pay off your debts (usually two or more) immediately and space out the cost over a set schedule of between 12 months and seven years. There are several reasons why someone would take out a debt consolidation loan, such as:
- To ensure any high-interest or overdue debts are cleared, saving you from potentially paying even more and ending up in a debt spiral.
- To make your outstanding debts more comfortable to manage each month by spacing them out over a longer loan term.
- To make managing multiple debts (such as those on different schedules) more convenient by combining them into one payment.
Credit card debts are among the most common to be consolidated with this type of loan, while other personal loans, cash loans and bills can also be included.
Why apply for a personal loan with Savvy?
What are the interest rates on debt consolidation loans?
Debt consolidation loans can come with the same minimum rates as any other personal loan, which can start from as low as the 6.00% p.a. to 7.00% p.a. range. However, in many cases, those with mounting debts that may be overdue could find that the rates available can rise above 20.00% p.a. (all figures correct as of May 2025).
The best deal on offer for you will depend on a range of factors, including:
- Credit score and history: the better your score and less complicated your history, the better the rate you’ll receive.
- Income and expenses: you’ll need to show your lender that you’re earning enough to comfortably support your loan payments after expenses are deducted.
- Borrowing history: a record of managing similar debts without issue in the past will also boost your chances of approval for a good rate.
- Employment: staying in the same job for a long period looks better on an application than frequent employment changes.
When you apply through Savvy, one of our friendly consultants will reach out to you to discuss the best available debt consolidation loan. They’ll also give you an indicative interest rate provided by one of our partnered lenders.
How much can I save with a debt consolidation loan?
It's important to understand how consolidating your debts can save you money across your term. Take the following example:
Clare is looking to consolidate her several outstanding debts into one payment. At the moment, she owes $10,000 on a four-year car loan at 9.50% p.a., $7,500 on another personal loan over three years at 11.00% p.a. and two credit card debts: $5,000 at 21.50% p.a. and $2,500 at 23.00% p.a.
The following tables show what her repayments look like each month with all four debts, as well as what she’d pay if she consolidated them into a four-year, 8.50% p.a. loan:
| Debt type | Amount owed | Interest rate | Term | Monthly payment | Total cost |
|---|---|---|---|---|---|
| Car loan | $10,000 | 9.50% p.a. | Four years | $252 | $12,060 |
| Personal loan | $7,500 | 12.00% p.a. | Three years | $250 | $8,968 |
| Credit card | $5,000 | 21.50% p.a. | Four years* | $155 | $7,322 |
| Credit card | $2,500 | 23.00% p.a. | Three years* | $95 | $3,418 |
| Total: | $25,000 | N/A | Four years | $741 | $31,768 |
| *Credit card debts come without a set repayment schedule. These calculations assume Clare pays enough each month to have the $5,000 debt cleared in four years and the $2,500 debt cleared in three years. Following the minimum payments for these debts, each would take over 30 years to be fully repaid. | |||||
| Debt type | Amount owed | Interest rate | Term | Monthly payment | Total cost |
|---|---|---|---|---|---|
| Debt consolidation loan | $25,000 | 8.50% p.a. | Four years | $617 | $29,578 |
By consolidating her debts, Clare would save almost $2,200 overall and trim down the total monthly cost by more than $130 in the process.
Once you apply with Savvy, a member of our experienced broker team will review your application and help you determine whether a debt consolidation loan is right for you. By looking over your debt and other finances, they’ll be able to let you know where you’re likely to sit with a lender.
Types of personal loans
Personal loan repayment calculator
It’s important to have an idea of what different loans might cost you overall before you apply. Fortunately, Savvy’s personal loan repayment calculator is simple to use and tells you everything you need to know about how much different offers might add up to overall based on a variety of different factors.
Your estimated repayments
$98.62
| Total interest paid: | Total amount to pay: |
| $1233.43 | $5,143.99 |
Debt consolidation vs balance transfers: how they’re different
If you’re looking to clear your credit card debts, a balance transfer card may be another option for you. This is another type of credit card that comes with 0% p.a. interest for a certain introductory period (up to two years in some cases).
By moving your outstanding credit card debt from your current card (or cards) to your new balance transfer card, you can potentially lock in crucial savings. However, this is only the case if you’re able to pay it off within the interest-free period on your balance transfer card.
It’s important to understand that once this introductory period is over, your card will revert to a much higher rate for any debt still unpaid. You’ll also need to pay a balance transfer fee of up to 3.00% of your debt, which will eat into your savings.
So, which option is best for you? Here’s where balance transfers or debt consolidation loans may be better than the other:
- If your credit card debt is small enough to be repaid within a short period, a balance transfer may suit you more.
- If your debts are from multiple sources, not just credit cards, a debt consolidation loan is likely to be the only option.
- If your debts are larger than the credit limit you’d be offered on a balance transfer card, you’ll be looking for a loan.
Are debt consolidation loans unsecured?
Most personal loans for debt consolidation are unsecured, meaning there’s no asset collateral involved in the loan agreement. This makes them more accessible for those who don’t have a car or eligible assets. It also means they can be processed and (potentially) approved more quickly.
However, many lenders do offer secured personal loans as well. If your car meets their criteria, for example, your loan can become secured. Interest rates for these loans are lower and borrowing ranges are generally higher, but it may take longer to process. It also means that if you default on the loan, your collateral can be repossessed by your lender, though this is a last resort.
It’s up to you to consider which is best for your situation by weighing up the pros and cons of unsecured and secured loans.
How to apply for a debt consolidation loan with Savvy
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Complete our simple online application form
First and foremost, you’ll need to fill out our quick and easy online form. Tell us about yourself, your finances and how much you need to consolidate your debts. This only takes a few minutes.
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Speak to your Savvy consultant about your options
Once you’ve done this, a member of our team will get to work comparing the best available loan deals from our panel of partnered lenders. They’ll reach out to discuss the next steps with you.
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Send your documents and formally apply
If you’re happy to move ahead, we can prepare your formal application for submission. Simply send the required documents through our online portal and we’ll do the rest.
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Get approved and sign your contract
We’ll let you know when you’re formally approved, which can happen as soon as the same day. All you’ll need to do is sign your loan contract and other forms electronically to receive your funds!
Personal loan eligibility and documentation
Eligibility
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Age
You must be at least 18 years of age
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Residency
You must be an Australian citizen or permanent resident (or, in some cases, an eligible visa holder)
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Income
You must be earning a stable income that meets your lender’s minimum threshold (this can start from as little as $20,000 per year)
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Employment
You must be employed on a permanent, casual or self-employed basis
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Credit score
You must meet your lender’s minimum requirements related to your credit score and not be bankrupt or under a Part IX debt agreement
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Contact
You must have an active phone number, email address and online bank account in your name
Documents
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Personal information
Your full name, date of birth, address and contact details
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Photo ID
Such as a driver's licence or passport
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Payslips
Your last two consecutive payslips (or your last tax return if you're self-employed)
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Assets and liabilities
Information about any assets you own (such as a car or house) and liabilities in your name (such as other loans)
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Bank statements
90 days of bank statements may be requested, but not always
