Debt consolidation is often a concept mentioned when a person has more than one debt and is struggling to deal with everything successfully. It’s not uncommon to have multiple credit cards and a home loan, for example. Every loan and credit card tends to have different interest rates and fees, making for a nightmare when it comes to tracking payments due and decreasing one’s overall debt.

The positive side of debt consolidation

Combining multiple existing debts into a single loan – or adding a necessary new loan onto an existing one – can decrease the fees that you pay and lessen the amount of time that you need to pay it off. It also provides you with a single repayment schedule, which is simpler to manage. Psychologically, a single debt can be far less stressful than multiple debts, because the numbers are clear and the variables are minimised.

The negative side of debt consolidation

A lot of people choose to consolidate debt by adding it to their mortgage. Generally speaking, this is a big mistake. While the interest rate is lower than a personal loan or credit card, it increases the amount of your home loan for the lifetime of the loan and removes equity from your primary asset – your home. If you have 25 years left to pay off your mortgage, adding $10,000 will mean that you pay interest on that extra money for the next 25 years. You could end up paying as much as $23,000 for that original $10,000 addition to your mortgage.

How to consolidate your debts effectively

For the vast majority of situations, a separate personal loan is cheapest and most effective for debt consolidation. The interest rate is far lower than that on a standard credit card, and the time period in which you’ll pay it off is much shorter than a home loan, meaning that the total interest you pay will be lower. Over 4 years, a $10,000 personal loan will usually cost you around $13,000 – much cheaper than the $23,000 it could cost you if rolled into your mortgage.


It is super easy to apply for a personal loan via our online application. Click the button below to get started. If you need help with the application, feel free to contact our office phone: 1300 360 450. or send us a message via our contact page.

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