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Written byShaun McGowan
Debt consolidation loans are a great way to roll all your debts into one to save money and make them easier to repay.
You may be able to get a debt consolidation loan if you have bad credit, but your lenders credit policies will apply - you’ll find non-bank and specialist lenders have more relaxed credit policies and offer a greater chance of approval.
Consolidating your debts should make them:
Of course, debt consolidation isn’t for everyone.
Debt can be expensive, and unpaid debts can quickly damage your credit score. To get the most out of your debt consolidation loan, you’ll want to do two things:
As debt consolidation rolls all your existing debts into a single loan, paying off all your debts will happen naturally over time.
Consider making extra repayments when you can as it will lower your debts, but crucially improve your credit score, allowing you to potentially refinance your loan at a better rate sooner.
Find a loan that allows you to make early and additional repayments to reduce your debt faster.
You can prevent future debt by creating a realistic budget to make sure that you can make repayments and to track your income and expenditure.
When reviewing your debt consolidation loan offers and rates, use the comparison rate.
The four types of fees you may need to consider:
Upfront and Ongoing fees are included in the comparison rate. However, variable fees - such as late-payment fees - are not, so be sure to keep these in mind when comparing deals.
Ultimately a finance company wants to make sure that you have stability. This is often shown by having been at the same address for a sustained period of time, likewise for your job. The longer you have been employed at the some job is generally favourable.
Obviously, most lenders prefer people who don't have a bad credit history, but rest assured, there are lenders who specifically try to help people who do have an impaired credit history.
To apply with bad credit, you’ll need to gather all necessary documentation and some additional information for your lender, which may include:
The most important aspect here is demonstrating to your lender an ability to repay the loan amount you wish to borrow.
Creating a budget and having a solid plan to repay your debts on time and in full can help improve your chances.
Once you’ve got your documents ready you can apply with most lenders online. Once the loan is approved, you will be given the money and will need to repay your existing debts, or in some instances, the lender will make these payments on your behalf.
You can apply for a debt consolidation loan in Australia if you are:
If you meet the basic eligibility for a debt consolidation loan, you will then need to compare lenders and assess their individual approval criteria.
To get approved, it can take 1-2 days as long as you're able to provide all the information that the lender requests.
In most instances you should be able to find a debt consolidation loan with an interest rate lower than a typical credit card rate.
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Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.
Information about borrowing rates The rate advertised are comparison rates. See below for further information about comparison rates. Using our lender SocietyOne as an example Tier 1 borrowers will receive an interest rate between 5.95% - 10.49% p.a. (comparison rate 5.95% - 12.83% p.a.). Tier 2 borrowers will receive an interest rate between 9.99% -12.19% p.a. (comparison rate 12.05% - 15.03% p.a.). Tier 3 borrowers will receive an interest rate between 11.99% - 15.99% p.a. (comparison rate 14.37% - 18.62% p.a.). Tier 4 borrowers will receive an interest rate between 14.99% - 19.99% p.a. (comparison rate 18.41% - 21.70% p.a.). The maximum annual percentage rate (APR) interest rate is 19.99% p.a. (comparison rate 21.70% p.a.). An establishment fee applies for most borrowers. Personal loan example: for a borrower with excellent credit (Tier 1 borrower), a loan of $10,000 over a 3 year term, with an interest rate of 8.99% p.a. (comparison rate 12.32% p.a.) and a $495 establishment fee, the fortnightly repayment would be $154 and the total cost over the life of the loan (including the establishment fee) would be $12,013. SocietyOne personal loans are available for terms of 2, 3 and 5 years. Minimum loan term repayment period is 2 years, maximum loan term repayment period is 5 years.
*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.