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Debt Consolidation Loans Australia
Debt Consolidation Loans Australia

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Debt consolidation loans in Australia

A debt consolidation loan is a popular solution for Australians looking to tackle their debt, streamline their finances and save money.

In fact, debt consolidation is by far the most common reason people look for a personal loan in Australia, according to personal loan statistics compiled by Money.com.au based on real loan data.

More than half (57%) of all loan requests in 2023 are for debt consolidation, with an average loan request of $22,573.

Our guide can help you understand your options and whether debt consolidation is right for you.

Credit card consolidation loans

What is debt consolidation?

Debt consolidation means combining multiple debts to make them more manageable. It can help you pay off your debt faster while saving on interest and fees.

Let's say you have multiple loans, credit card debt, buy now pay later accounts and other debts with different providers.

With debt consolidation, you join the debts together into a single personal loan, ideally one with a lower interest rate, low fees and flexible repayment options.

Benefits of consolidating debt

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1

You turn multiple debts into a single amount that can be repaid weekly, fortnightly or monthly.

2

The loan term is fixed, with a structured timeframe for repaying the debt. Choose a term from 1-7 years.

3

Personal loan interest rates are often lower than other forms of debt (like credit cards). This saves you money.

How does consolidating debt work? 5 steps

Consolidating debt can be a fairly simple process. The lender you apply for the debt consolidation loan with may even do some of the work for you.

Here are the main steps:

  1. Make a list of the debts you want to consolidate. Will it be all your debts or just some of them?
  2. Compare debt consolidation loans based on your desired loan amount.
  3. Apply for the laon that fits your needs and provide any supporting documents requested by the lender.
  4. Your application is assessed by the lender based on your financial situation.
  5. If you're approved, the lender will either pay the loan funds to you for you to pay off your other debts; or arrange for the money to be sent directly to your other lenders to settle those debts.

Either way, make sure the debts have been paid off in full and the accounts are closed so you’re not tempted to take on new debt.

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Interest rates on debt consolidation loans

Currently, the lowest debt consolidation loan interest rates in Australia start from 6.57% p.a. (comparison rate 6.57% p.a.).

Borrowers with a good credit rating will be eligible for the cheapest debt consolidation interest rates. But rates for some individuals will be higher. For example, for debt consolidation loans with bad credit, interest rates generally start from 15-20%.

To give you an idea of the rates real borrowers typically pay, the average interest rate quoted on a debt consolidation loan is 14.64% p.a., based on thousands of quotes analysed by Money.com.au.

This is slightly higher than the overall average interest rate for all personal loan purposes (13.87% p.a.).

On top of your credit rating, factors like your income, employment status and whether the loan is secured or not could impact your loan interest rate.

The table below shows the impact your interest rate can have on your weekly repayments.

Best debt consolidation loan interest rate comparison

Compare a selection of personal loan interest rates in Australia, with ranges based on the borrower's credit score and other factors. As you can see, the difference between a lender’s lowest and highest rate can be massive. This is why it's important to get personalised quotes from multiple lenders. The table is sorted by lowest comparison rate.

Harmoney

Personal loan interest rate

5.76% p.a. to 24.03% p.a.

Comparison rate*

6.55% p.a. to 24.98% p.a.

Plenti

Personal loan interest rate

6.57% p.a. to 24.09% p.a.

Comparison rate*

6.57% p.a. to 26.28% p.a.

NOW Finance

Personal loan interest rate

6.75% p.a. to 26.95% p.a.

Comparison rate*

6.75% p.a. to 26.95% p.a.

Pepper Money

Personal loan interest rate

6.75% p.a. to 26.95% p.a.

Comparison rate*

6.75% p.a. to 26.95% p.a.

ING

Personal loan interest rate

6.89% p.a. to 18.99% p.a.

Comparison rate*

7.10% p.a. to 19.23% p.a.

Our Money Market

Personal loan interest rate

6.57% p.a. to 18.99% p.a.

Comparison rate*

7.19% p.a. to 21.78% p.a.

Moneyplace

Personal loan interest rate

7.24% p.a. to 19.99% p.a.

Comparison rate*

7.24% p.a. to 21.49% p.a.

Liberty Financial

Personal loan interest rate

7.24% p.a. to 19.99% p.a.

Comparison rate*

7.24% p.a. to 21.49% p.a.

Bank of Melbourne

Personal loan interest rate

6.89% p.a. to 19.99% p.a.

Comparison rate*

7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate)

BankSA

Personal loan interest rate

6.89% p.a. to 19.99% p.a.

Comparison rate*

7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate)

St.George Bank

Personal loan interest rate

6.89% p.a. to 19.99% p.a.

Comparison rate*

7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate)

Great Southern Bank

Personal loan interest rate

7.49% p.a. to 19.99% p.a.

Comparison rate*

7.74 % p.a. to 20.27% p.a.

NAB

Personal loan interest rate

6.99% p.a. to 20.49% p.a.

Comparison rate*

7.91% p.a. to 21.33% p.a.

ANZ

Personal loan interest rate

7.49% p.a. to 19.99% p.a.

Comparison rate*

8.18% p.a. to 20.58% p.a.

G&C Mutual Bank

Personal loan interest rate

7.99% p.a. to 16.99% p.a.

Comparison rate*

8.20% p.a. to 17.22% p.a.

Society One

Personal loan interest rate

8.20% p.a. to 24.89% p.a.

Comparison rate*

8.27% p.a. to 25.64% p.a.

Westpac

Personal loan interest rate

7.99% p.a. to 20.49% p.a.

Comparison rate*

9.18% p.a. to 21.61% p.a.

Wisr

Personal loan interest rate

9.04% p.a. to 23.79% p.a.

Comparison rate*

9.88% p.a. to 24.56% p.a.

Commbank

Personal loan interest rate

8.49% p.a. to 20.49% p.a. (fixed); 8.00% p.a. to 20.00% p.a. (variable)

Comparison rate*

9.88% p.a. to 21.78% p.a. (fixed); 9.40% p.a. to 21.30% p.a. (variable)

MoneyMe

Personal loan interest rate

9.20% p.a. to 25.20% p.a.

Comparison rate*

10.58% p.a. to 26.58% p.a.

Latitude Financial

Personal loan interest rate

9.49% p.a. to 29.99% p.a.

Comparison rate*

10.93% p.a. to 31.83% p.a

Fair Go Finance

Personal loan interest rate

21.90% p.a. to 25.90%

Comparison rate*

27.54% p.a. to 33.80% p.a.

Jacaranda Finance

Personal loan interest rate

17.95% p.a. to 24.95% p.a.

Comparison rate*

32.40% p.a. to 39.63% p.a.

Personal loan interest rateComparison rate*

Harmoney

5.76% p.a. to 24.03% p.a.

6.55% p.a. to 24.98% p.a.

Plenti

6.57% p.a. to 24.09% p.a.

6.57% p.a. to 26.28% p.a.

NOW Finance

6.75% p.a. to 26.95% p.a.

6.75% p.a. to 26.95% p.a.

Pepper Money

6.75% p.a. to 26.95% p.a.

6.75% p.a. to 26.95% p.a.

ING

6.89% p.a. to 18.99% p.a.

7.10% p.a. to 19.23% p.a.

Our Money Market

6.57% p.a. to 18.99% p.a.

7.19% p.a. to 21.78% p.a.

Moneyplace

7.24% p.a. to 19.99% p.a.

7.24% p.a. to 21.49% p.a.

Liberty Financial

7.24% p.a. to 19.99% p.a.

7.24% p.a. to 21.49% p.a.

Bank of Melbourne

6.89% p.a. to 19.99% p.a.

7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate)

BankSA

6.89% p.a. to 19.99% p.a.

7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate)

St.George Bank

6.89% p.a. to 19.99% p.a.

7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate)

Great Southern Bank

7.49% p.a. to 19.99% p.a.

7.74 % p.a. to 20.27% p.a.

NAB

6.99% p.a. to 20.49% p.a.

7.91% p.a. to 21.33% p.a.

ANZ

7.49% p.a. to 19.99% p.a.

8.18% p.a. to 20.58% p.a.

G&C Mutual Bank

7.99% p.a. to 16.99% p.a.

8.20% p.a. to 17.22% p.a.

Society One

8.20% p.a. to 24.89% p.a.

8.27% p.a. to 25.64% p.a.

Westpac

7.99% p.a. to 20.49% p.a.

9.18% p.a. to 21.61% p.a.

Wisr

9.04% p.a. to 23.79% p.a.

9.88% p.a. to 24.56% p.a.

Commbank

8.49% p.a. to 20.49% p.a. (fixed); 8.00% p.a. to 20.00% p.a. (variable)

9.88% p.a. to 21.78% p.a. (fixed); 9.40% p.a. to 21.30% p.a. (variable)

MoneyMe

9.20% p.a. to 25.20% p.a.

10.58% p.a. to 26.58% p.a.

Latitude Financial

9.49% p.a. to 29.99% p.a.

10.93% p.a. to 31.83% p.a

Fair Go Finance

21.90% p.a. to 25.90%

27.54% p.a. to 33.80% p.a.

Jacaranda Finance

17.95% p.a. to 24.95% p.a.

32.40% p.a. to 39.63% p.a.

Personal loan interest rate comparison based on products analysed by Money.com.au advertising a high and low interest rate range. Rates are current as of 4 December 2023. Check with the provider for full current loan details, including rates, fees, eligibility and terms and conditions. While this is an extensive list of personal loans available in Australia, not all loans in the market are shown. This list is for reference only and does not reflect the selection of loans you may see if you get a personalised quote through Money.com.au.

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How to compare debt consolidation loans and lenders

1

Interest rate

Look for a debt consolidation loan rate that’s lower than what you’re paying on your existing debts. But when comparing loans don't assume that a lender’s advertised rate will be the rate you pay. Your rate could be higher.

2

Loan fees

Consider all the fees you could end up paying. That means application and establishment fees, ongoing fees and early repayment fees. Don't forget you may also need to pay fees to your existing lenders to close off your debts as part of the process.

3

Comparison rate

The comparison rate represents the total cost of the loan per year, including interest and most fees. This is a truer estimate of the cost of your loan than the interest rate.

4

Loan term

Choose this carefully and factor it in when calculating the overall cost of your loan. A low regular repayment over a long loan term could end up costing you more than a high regular repayment for a shorter term.

5

Repayment flexibility

Look for options like a choice of weekly, fortnightly or monthly repayments, plus the ability to repay the loan early if you want. Just watch out for lenders that charge fees for this convenience.

6

Loan amount

Make sure you match the loan amount to your existing debts so you can focus on paying those off. Avoid adding to your debt by borrowing more.

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Who is eligible for a debt consolidation loan?

You can apply for a debt consolidation loan in Australia if you are:

  • Over the age of 18; and
  • An Australian citizen or permanent resident; and
  • Employed or have another regular source of income

Lenders will also look closely at your financial situation before deciding if you’re eligible. They'll consider:

  • Your credit history and credit score
  • Your income level
  • Your employment history
  • Your expenses
  • Any other debts you have (on top of what you’re consolidating)
  • What assets you own (e.g. a home or car)

The lender will ask to see evidence such as bank statements and payslips to demonstrate your financial position.

When can a debt consolidation loan help?

David started by explaining some of the possible benefits of debt consolidation loans.

“People struggling financially usually have less planning or structure to manage their debts. Personal loans on the other hand have a fixed repayment,” he said.

“Generally once a structured repayment arrangement is in place, the more people see the debt reducing and the faster they make the payments to clear the debt. It’s not true for everyone but it has been the general trend we have observed.”

When should you be wary?

David said there’s a big difference between understanding how a debt consolidation loan could help in theory and knowing whether it is the right solution for you.

People can “rely too heavily on a lender’s view,” he said. “If the lender approves it then it must be ok? But that isn’t necessarily the case.”

Instead he said borrowers should look at their own budget to figure out if the new loan is affordable in the long run.

Get advice if you need it

David suggested getting independent help as early as possible.

“Talk to a financial counsellor or the National Debt Helpline to see what other options you might have available,” he advised.

“Having an independent person to help you can do wonders for your confidence and your ability to come up with something realistic for your circumstances.”

Debt Consolidation Personal Loan FAQs

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I’ve explained debt consolidation in detail. But payment consolidation is another approach where you keep the debts separate, but arrange them so that all the payments are made at the same time each week, fortnight or month.

This way it seems like you have a single repayment.

You could also negotiate with the individual lenders on the repayment amounts at the same time if needed.

There's no minimum credit score for getting a debt consolidation loan in Australia. But some individual lenders (particularly the major banks) may have limits.

Whether or not your application is approved will come down to a combination of factors. For example, if you can demonstrate that you will be able to comfortably meet the loan repayments, you may be approved for a debt consolidation loan, even with a bad credit score.

But your credit score will likely impact what interest rate you pay.

Here's an estimate of how different credit score levels (based on how credit reporting company Equifax groups them) could impact your interest rate:

  • Excellent credit score (853 to 1,200): Usually these borrowers have access to a lender's lowest interest rates.

  • Very good credit score (735 to 852): Depending on the lender, your interest rate may be 2-3% higher than borrowers with an excellent credit score.

  • Good credit score (661 to 734): Your interest rate could be around 5-6% higher than the lender's lowest advertised rate.

  • Average credit score (460 to 660): Your interest rate could be 8-9% higher than the lowest rate available.

  • Below average credit score (0 to 459): Your choice of lenders is likely to be quite limited and you may only have access to very high interest rates, starting from around 20-25% p.a. and potentially higher in some cases.

Not usually. Provided you meet the lender’s credit criteria, your debt consolidation loan should have a similar interest rate to comparable personal loan products.

Yes, most lenders offer unsecured debt consolidation loans. These may have higher interest rates than secured loans but won’t require you to use your assets as security.

Every case is different and the answer to this question will depend on your home loan and debts.

However, because home loans generally have longer terms than other forms of household debt, consolidating other debts into your mortgage could end up costing you more in the long run.

If you're eligible for the loan, the application process for a debt consolidation loan can be quite quick and straightforward. It’s similar to refinancing a loan.

With most lenders you can complete the process online and your loan could be approved and funded the same day in some instances.

For borrowers with more complicated circumstances, such as having bad credit, it can take longer and you may need to provide additional evidence to support your application.

Self employed borrowers may need to follow a different process to prove their income and this could take longer.

Most debt consolidation lenders operate throughout the country. Whilst most are located in the major capital cities like Perth, Sydney, Melbourne, Brisbane, Adelaide and Hobart, they often have local representatives across the smaller cities as well.

All the lenders we work with have Australian based teams. So rest assured, when arranging your loan you'll be working with a lender in Australia.

Shopping around for the right loan can save you thousands of dollars in interest and fees.

Personal Loans guides and resources

The great thing about personal loans is they can fund almost anything. They are perfect when you need that bit extra to cover expenses, start a project or reset your finances to get back on track.

Written by

Shaun McGowan Money.com.au founder

Loans Expert

Shaun McGowan

Reviewed by

Sean Callery Editor Money.com.au

Editor

Sean Callery

AS FEATURED IN

*Information about comparison rates Comparison rates are designed to allow borrowers to understand the true cost of a loan by taking into account fees and charges, the loan amount and the term of the loan. The comparison rate is based on an unsecured fixed rate personal loan of $10,000 over 3 years. WARNING: Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.

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