A debt consolidation loan is simply a personal loan used to clear one or more outstanding debts. There are several key reasons why someone would look to consolidate their debts into a personal loan:
- 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.
If you're looking to lump all your debts into a single, manageable payment, you can apply for a loan with Savvy today! We're partnered with a range of trusted Australian lenders and, with the help of our experienced brokers, will find the best available deal fro your needs!
Why apply for a personal loan with Savvy?
What debts can I consolidate with a personal loan?
There’s a wide range of debts that can be covered by a single personal loan. Some common uses for these loans include:
- Credit card debts
- Payday loans
- One or more other personal or car loans
- Store card or credit balances
- Overdue rent or bills
Because personal loans can be used however you like, you can consolidate as many outstanding costs as you can comfortably manage to repay (provided you’re approved for the amount you’re looking for).
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 18.50% p.a. and $2,500 at 20.00% 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 | 18.50% p.a. | Four years* | $146 | $7,003 |
| Credit card | $2,500 | 20.00% p.a. | Three years* | $93 | $3,269 |
| Total: | $25,000 | N/A | Four years | $741 | $31,300 |
*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 |
As you can see, by consolidating her debts, Clare would save over $1,700 overall and trim down the total monthly cost by more than $120 in the process.
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 |
How to compare personal loans for debt consolidation
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1. Interest rate
Securing the best available rate is crucial, as the lower your rate, the less you’ll pay overall. Even small differences could save much-needed funds. For instance, a $30,000 personal loan repaid monthly over five years at 8.50% p.a. would cost you over $6,900 in interest. However, even locking in a rate of 7.50% p.a. would reduce your interest bill by over $850.
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2. Fees
In addition to interest, fees are also important to think about. Even seemingly low fees can mount up over time, so it’s worth comparing them. The main charges to consider when considering different offers are (all figures are estimates):
Ongoing/monthly service fees: $0 to $10
Establishment fee: $0 to $600
Early repayment fee: depends on loan value and time remaining
Late payment fees: $15 to $35 -
3. Loan amounts
Not every lender will offer the same potential borrowing range on their loans. While they can range from as little as $5,001 to as much as $75,000 unsecured, some financiers may impose higher minimums of $10,000 or more and many cap their loans at a maximum of $50,000.
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4. Term lengths
The same applies to the potential term lengths on offer; some lenders won’t offer the full range of one to seven years. Some may raise the minimum term to two or three years, while on the other end of the scale, seven isn’t always the magic number, with financiers offering loans with repayment periods up to a maximum of five years.
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5. Repayment flexibility
It’s important to also consider how much freedom you get when repaying your personal loan. Having a loan with no early repayment fees could help you save a significant amount of money over the life of your loan.
For example, a $30,000, five-year loan repaid monthly at 7.50% p.a. would set you back $6,069 in interest overall. However, by making a free additional repayment of $100 per month, you’d slash the total cost to $5,019 and have it paid off ten months earlier.
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6. Qualification criteria
Although different lenders will have different criteria, some basic points are likely to apply across the board. We’ve unpacked these further down so you can know what you’ll need when you apply through Savvy.
It’s important to compare your personal loan options before you apply, which you can do right here with Savvy. We’re partnered with 40+ reputable lenders, who we compare to match you with a debt consolidation product that suits.
How much will I be able to borrow?
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Your income and expenses
The more you take home each week or fortnight after your expenses are deducted, the more you’re likely to be able to borrow.
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Your employment
The stability of your employment will also be considered by your lender. Having years in the same permanent job will help you out, while shorter-term casual employment may limit your borrowing power.
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The number of borrowers
If you choose to add a co-borrower to your loan who is also earning an income, the added funds available may result in greater borrowing power.
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Your credit score and history
Those with an imperfect credit score or patchy history are less likely to be approved for larger sums. However, if you can point to a track record of successfully repaying similar loans, you’ll be seen as more credible by your lender.
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Loan security
If you opt for a secured personal loan, your borrowing power may be increased, as your lender may be more confident in you with the added collateral. In this case, your borrowing power may be more closely tied to the value of your collateral.
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Your dependants
Anyone who has kids knows they can be a drain on your finances. The cost of having children will be factored into your borrowing power.
The pros and cons of debt consolidation loans
Pros
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Making your debts more convenient
By condensing all your debts into one loan, you won’t have to worry about remembering to make multiple payments on different schedules each month.
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Saving money overall
If you’re using your loan to consolidate several high-interest debts, such as credit cards, you can secure a personal loan at a lower rate and save a significant amount.
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Pay at your own pace
Using a personal loan to clear your outstanding debts allows you to take up to seven years to space out your repayments (depending on your lender).
Cons
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Stretching out short-term debts
The flip side of paying off smaller debts in this manner is that, in some cases, you may pay them off at a slower rate than you otherwise would’ve, which could actually cost you more overall.
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Possible charges for paying out other loans
In some cases, you may be required to pay a fee to release yourself from your existing loan contract early, which could cost you up to hundreds of dollars.
Apply for your Debt Consolidation loan online
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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. Select loan/debt consolidation, then tell us about yourself and your finances.
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Compare your options with Savvy
Once you’ve done this, you'll be assigned to one of our brokers who may contact you to confirm your details and then provide you with the products you're best suited for. You’ll then be able to assess the products on offer from our partnered lenders.
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Send your documents and formally apply
If you’re happy with one of the options available, you can go ahead and formally apply. We’ll handle this for you; 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 in a matter of hours, and all you’ll need to do is sign your loan contract electronically to receive your funds as soon as the same day.
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
