The short answer: debt consolidation means rolling several debts, such as credit cards, buy now pay later balances and personal loans, into one new loan with a single repayment. A debt consolidation loan is usually a personal loan used for exactly this. It saves money only when the new loan costs less in total than the debts it replaces, after fees, and without stretching the term so far that extra interest cancels out the lower rate.
Noma Finance compares debt consolidation loans across a panel of around 25 lenders and shows you the total cost against what you pay now, so you can see whether consolidating actually saves money before you sign. Consolidation is a tool, not a cure. It works when the numbers stack up and the cards you clear stay clear.
Debt consolidation is when you take out one new loan to pay off several existing debts, then repay that single loan instead. Instead of juggling several repayments on several due dates at several interest rates, you have one repayment, one rate and one end date. The aim is simpler repayments and, ideally, a lower total cost.
A debt consolidation loan is a personal loan used to pay out other debts, most often credit cards, store cards, buy now pay later balances and smaller personal loans. Most are unsecured, with a fixed or variable rate and a term of one to seven years. Lenders may pay your old debts directly, or pay the funds to you to clear them yourself.
Debt consolidation works in six steps, from adding up what you owe to closing the accounts you have cleared. Following them in order makes it easier to check the numbers before you commit.
There are four common ways to consolidate debt in Australia, and each suits a different mix of debts. A personal loan is the most common, but it is not always the lowest-cost option.
Moneysmart notes that a balance transfer may be a good way to get on top of card debt, as long as you clear it before the promotional rate ends. Turning unsecured debts into a debt secured on your home can lower the rate, but it also puts your home behind debts that used to be short term. Our guide on how personal loans, credit cards and BNPL compare explains how each type of debt is priced.
A debt consolidation loan saves money when the new loan has a lower total cost than the debts it replaces, including fees. That usually means a lower comparison rate and a term no longer than you need. Here is an illustrative $15,000 of debt, currently averaging around 18%, paid off four different ways.
The lowest repayment is not the lowest cost. A three-year consolidation loan at 11% saves about $1,840 compared with keeping things as they are. Stretch the same loan to seven years and the repayment halves, but you pay about $2,050 more in interest than keeping your current debts. Adding the debt to a 25-year home loan drops the repayment to about $101, yet the interest climbs to around $15,380, more than the debt itself.
The fix is simple: keep the term short and keep paying at least what you pay now. If you want a benchmark for the rate, our guide to what counts as a good personal loan rate sets out the ranges.
Debt consolidation is the wrong move when it treats the symptom and not the cause. Moneysmart warns that it can cost more if the new rate or fees are higher, and that new credit can tempt you to spend more. These are the situations where it usually does not pay.
Before consolidating, it is worth being honest about what caused the debt and setting up a simple budget so the fresh start stays fresh. Our budget planner shows where your money goes each month.
Moneysmart recommends only dealing with licensed providers and checking their credit licence or credit representative number on ASIC's professional register. Be wary of anyone who rushes you, will not put costs in writing, or promises to clear your debt no matter how much you owe. Noma Finance is Credit Representative 544208 under Australian Credit Licence 389328, which you can check on the same register.
Your credit score matters, but it is only one piece of the picture. Lenders care far more about what you already pay out each month against what you earn, known as your debt-to-income position. That is useful to know, because consolidating can change that picture in your favour.
A broker compares debt consolidation loans across a panel of lenders rather than offering one bank's product. A bank can only show you what it sells. A broker can line up your current debts against several loan options and show which one, if any, costs less in total.
At Noma Finance, we start with a list of what you owe and what you pay each month, then compare rate, fees, term and total cost across around 25 lenders. You see every number before you sign. If consolidating will not save you money, we will tell you, and in most cases there is no cost to you, because the lender pays the broker's commission. If you are weighing up going direct, our guide on using a finance broker versus a bank walks through the difference. You can see everything we help with on our services page.
A debt consolidation loan is a personal loan used to pay out several other debts, such as credit cards and buy now pay later balances. You then make one repayment on one loan. It saves money only if the total cost is lower than your current debts.
You list your debts, compare consolidation loans on total cost, and apply for one loan large enough to pay them out. The old debts are cleared and you repay the single new loan. Closing the cleared accounts stops the debt from building up again.
Applying for a new loan is recorded on your credit file, and closing old accounts can shift your score in the short term. Over time, making one repayment reliably on a consolidation loan can help. The bigger risk to your score is missing repayments, so only consolidate into something you can comfortably manage.
It depends on the numbers. If a consolidation loan has a lower total cost than your current debts and the repayment fits your budget, consolidating can help. If your debts are small and nearly paid off, paying them off separately may be simpler and cheaper.
Most lenders will consolidate credit cards, store cards, buy now pay later balances and personal loans. Some will also include a car loan. What a lender accepts varies, so check before you apply.
Many home loans allow you to add other debts through a top-up or refinance. The rate is usually lower, but the debt is spread over a much longer term and secured on your home. Compare the total interest, not just the repayment.
Not on its own. Consolidation tidies the debt you have, but staying out of debt comes down to spending less than you earn. Pairing consolidation with a simple budget is what makes the fresh start stick.
Yes. A broker compares consolidation loans across multiple lenders and shows the total cost against what you pay now. In most cases there is no cost to you, as the lender pays the commission.
Ashley Van Rosmalen is the founder of Noma Finance, an Australian finance and asset brokerage. Ashley has personally held every loan type Noma helps with, from car and personal through to home and business finance, so the guidance comes from experience rather than a script. Read more about Ashley and the team at https://www.nomafinance.com.au/about-us.
General information disclaimer. This article is general information only and does not take into account your objectives, financial situation or needs. It is not financial or credit advice. Any rates, repayments and figures shown are illustrative only, correct as at the date shown, and will vary with your situation and the lender. Consider whether the information is right for you, and seek advice from a licensed professional before making a decision.
Credit Representative 544208 is authorised under Australian Credit Licence 389328. Van Rosmalen Group Pty Ltd, trading as Noma Finance.
Last updated: 9 October 2026
Sources last checked: 9 October 2026
Written by Ashley, founder of Noma Finance. Before becoming a finance and asset broker, Ashley worked at car dealerships, and has personally held every loan type Noma helps with. Noma compares options across a panel of lenders to help people find finance that fits their situation, explained in plain English.
This article is general information only. It does not take into account your objectives, financial situation or needs, and it is not financial, credit or tax advice. Consider whether it is appropriate for you and seek advice from a licensed professional before making a decision. Tax outcomes for novated leases and chattel mortgages depend on your circumstances, so speak with a licensed tax adviser or accountant. Any figures used are illustrative only.
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