What Is Debt Consolidation? Options, Costs and Risks

Debt consolidation is a financial strategy that combines multiple debts—such as credit cards, personal loans, car finance or tax debts—into a single repayment, often at a lower interest rate and with a defined end date. Rather than tracking multiple due dates and high-interest balances, the approach aims to replace financial complexity with simplicity, structure and control.

This article, written by Mary Nebotakis, Managing Director of Natloans (B. Eco, Dip. Financial Services), explains how debt consolidation works, the main methods available, the advantages and disadvantages of each, and how Natloans can help you find the right structure for your situation.

How Debt Consolidation Works

Debt consolidation involves taking out a new loan to pay off several existing debts. From that point forward, you make one repayment to one lender. The new loan can take several forms depending on your circumstances:

The core goals are to lower your interest rate, reduce monthly repayments, simplify your finances, and pay off debt faster through a structured plan.

Debt Consolidation Methods Explained

Using a Home Loan (Refinance or Equity Release)

Homeowners may be able to refinance a mortgage to include eligible existing debts, subject to valuation, borrowing capacity and lender approval. A lower mortgage rate does not by itself make this the cheapest solution: a longer term, new fees and using the home as security can worsen the outcome. Compare the total repayment cost and risk before deciding.

Benefits Considerations
Potential lower headline rate than existing debts; no lowest-rate guarantee Spreading short-term debt over 25–30 years may increase total interest if not structured carefully
One consolidated repayment Your home is used as security
Long-term savings potential Discipline required not to re-accumulate credit card debt
Option to choose fixed or variable rate

The original describes Natloans as helping structure consolidation with a goal of saving interest and repaying debt sooner. That is a service aim, not proof of an outcome for every borrower. Ask for a written comparison of total costs and repayment dates.

Using a Personal Loan

Personal loans are a common consolidation option for people who do not own property or prefer not to use their home as security. A fixed-term personal loan (typically between one and seven years) is used to pay off credit cards, Buy Now Pay Later accounts or smaller loans.

Benefits Considerations
A fixed term; fixed or variable interest depending on the product Interest rates vary depending on credit score
Clear end date for becoming debt-free May include establishment fees
Often lower interest than credit cards Monthly repayments can exceed previous card minimums; faster payoff depends on the actual term, rate and payments
Unsecured options available (no property required)

Natloans compares more than 50 lenders to identify competitive personal loan consolidation options, including specialist lenders that may not be accessible directly through a bank.

Credit Card Debt Consolidation and Balance Transfers

High-interest credit cards can trap borrowers in a cycle of minimum repayments and rising balances. Consolidating credit card debt provides a clearer path out of that cycle. Options include:

Benefits Considerations
Potential 0% interest for a promotional period (typically 6–24 months, confirm with lender) Balance transfer fees may apply
One repayment instead of multiple cards Interest reverts after the promotional period ends
Opportunity to close old cards and stop the debt cycle Old cards must be cancelled; discipline is essential

Natloans helps clients choose a structure designed to eliminate credit card debt, not simply shift it from one account to another.

Car Loan and Asset Finance Consolidation

The source discusses car loans, equipment finance and novated leases as possible restructuring candidates. Eligibility is not automatic. Existing payout amounts, asset security, lender restrictions and any novated-lease termination or employer arrangements must be checked before treating a debt as transferable. A car refinance, personal loan or mortgage refinance may be considered where permitted.

Benefits Considerations
Potential lower rate, subject to comparison Early payout fees may apply
One single repayment The vehicle may be used as security
Option to extend or shorten the loan term Longer terms can increase total interest if not managed carefully
Potential cash-flow improvement, subject to costs and term

Advantages and Disadvantages of Debt Consolidation

Advantages

Disadvantages

Before proceeding, it is important to compare costs, loan terms and security risks carefully. ASIC's MoneySmart provides an independent checklist for evaluating debt consolidation and refinancing options: moneysmart.gov.au/managing-debt/debt-consolidation-and-refinancing.

Why Use a Broker for Debt Consolidation?

A bank can only present its own products. A broker compares options across a wide panel of lenders to find the structure, rate and term that best suits your individual situation. Working with a broker means:

Natloans compares more than 50 banks and specialist lenders across home loans, personal loans, car finance, credit cards and business lending. The brokerage has been operating for more than 15 years and has assisted more than 10,000 clients across Australia. Specific outcomes depend on individual circumstances and cannot be guaranteed in advance.

About Natloans

Natloans is an Australian finance and mortgage brokerage with more than 15 years of experience helping clients manage and consolidate debt. The business accesses a panel of more than 50 banks and specialist lenders and takes a tailored approach rather than applying a one-size-fits-all solution. Natloans operates across home loans, personal loans, car and asset finance, credit cards and business lending.

For current information about Natloans' services, lender panel, or to discuss your situation, contact the team directly:

Frequently Asked Questions

What is debt consolidation and how does it work?

Debt consolidation combines multiple debts into one loan or repayment—often at a lower interest rate—making it simpler to manage and, if structured correctly, faster to pay off. A new loan is used to clear the existing debts, leaving you with a single repayment to a single lender.

Is debt consolidation a good idea?

It can be beneficial if it lowers your interest rate, simplifies your repayments and helps you become debt-free sooner. It is particularly useful for people juggling multiple debts or carrying high-interest credit card balances. Whether it suits your situation depends on your debts, assets and financial goals—speaking with a broker can help clarify this.

Does debt consolidation hurt your credit score?

A credit application can create an enquiry and affect the score; neither the size nor duration of the effect is fixed. On-time repayments and lower debt may support a stronger credit profile over time, but consolidation does not guarantee an improvement. Avoid multiple unnecessary applications. See Equifax on factors affecting scores and ASIC Moneysmart’s balance-transfer guidance.

What are the disadvantages of debt consolidation?

Possible disadvantages include fees, longer loan terms that may increase total interest, the risk of accumulating new debt if old accounts remain open, and—where a home loan is used—the risk of securing short-term debt against your property.

Which is better: a personal loan or a debt consolidation loan?

A personal loan can itself be used for debt consolidation. Some lenders also offer products specifically labelled as debt consolidation loans, which may include tailored features. The best option depends on your individual circumstances, including your credit profile, assets and the types of debt you hold. A broker can compare both.

Can I put all my debts into one payment?

Possibly, but not every debt is eligible for every product, and the approved amount may not clear every balance. Confirm which debts will be paid out, any balances left behind and the new payment schedule. Tax debts, leases and secured asset loans require specific assessment rather than a blanket yes.

What types of debt can be consolidated?

Credit cards, personal loans, car finance, Buy Now Pay Later accounts, equipment finance, novated leases and, in some cases, tax debts may all be candidates for consolidation. Not every debt is eligible under every method; a broker can advise on what is possible in your specific case.

What costs should I consider before consolidating?

Relevant costs may include establishment fees on the new loan, early payout or break fees on existing loans, balance transfer fees for credit cards, and refinancing costs where a home loan is involved. It is important to weigh these costs against the potential interest savings. ASIC's MoneySmart checklist is a useful independent reference: moneysmart.gov.au/managing-debt/debt-consolidation-and-refinancing.

Do I need to own property to consolidate debt?

No. An unsecured personal loan or an eligible credit-card balance transfer may be an alternative without home ownership. Some consolidation products are secured, so check the specific agreement. Home equity offers another possible route but does not establish affordability or approval.

What happens if I consolidate debt into my home loan but keep spending on credit cards?

This is one of the most important risks of home loan consolidation. If old credit card accounts remain open and active, you may rebuild the same level of debt on top of your home loan, leaving you in a worse position overall. Cancelling old cards and maintaining spending discipline is essential for the strategy to work as intended.

How does Natloans approach debt consolidation differently from a bank?

Unlike a bank, which can only offer its own products, Natloans compares options across more than 50 banks and specialist lenders. The brokerage analyses each client's debts individually and recommends the consolidation method—home loan, personal loan, car loan or a combination—most likely to achieve a better outcome. Natloans also provides ongoing support after settlement.

How do I get started with Natloans?

You can contact Natloans by phone on 1300 955 791 or visit www.natloans.com.au to enquire. A broker will assess your current debts, explain your options and outline what a consolidation strategy could look like for your situation. Pre-qualification discussions do not constitute final loan approval.

Next Steps

If you are managing multiple debts and want to understand whether consolidation could help, the following steps are a practical starting point:

  1. List your current debts, interest rates, repayment amounts and remaining terms.
  2. Review ASIC's MoneySmart guidance on debt consolidation and refinancing for an independent perspective: moneysmart.gov.au/managing-debt/debt-consolidation-and-refinancing.
  3. Contact Natloans to discuss your situation and receive a tailored assessment of your options.

You may also find these related Natloans articles useful:

Source: This article is based on content published at natloans.com.au/what-is-debt-consolidation/, authored by Mary Nebotakis, Managing Director, Natloans, and retrieved on 15 October 2026. Rates, lender counts, fees and eligibility conditions are not independently verified as current and must be confirmed directly with Natloans before making any financial decision. This content is general in nature and does not constitute financial advice.

Source claims and decision boundaries

The source was published 20 October 2025 and attributed to Mary Nebotakis. It claims 15-plus years’ experience, 50-plus lenders, 10,000-plus clients, more than 750 five-star Google reviews and multiple awards, including asset-finance recognition. These are publisher claims from that article, not independently verified current counts. The claim of finding the “best” or “lowest possible” option is not proof of whole-market coverage or guaranteed savings.

A balance-transfer card is revolving credit, so a promotional period is not itself a fixed debt-clearance date. Check transfer limits, fees, required repayments and the rate after the offer. Purchases can carry a different rate, and missed payments may end the promotion. The original’s 6–24 month range is a general example, not an available Natloans offer. See ASIC Moneysmart’s balance-transfer guidance, checked 15 October 2026.

For consolidation, list every balance, rate, fee, remaining term and payment; compare the new agreement on the same basis. Protect against taking on fresh debt after old accounts are cleared. If repayments are already unaffordable, speak with existing lenders about hardship assistance or seek free financial counselling. A further loan is not automatically the appropriate response. See ASIC Moneysmart’s consolidation guidance, checked 15 October 2026.

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