About debt consolidation 

1. What is debt consolidation? 

Debt consolidation is the act of combining multiple personal debts into your home loan, allowing you to make a single monthly repayment. This can be done by getting a debt consolidation home loan. 

2. How can I consolidate my debt? 

You’ll be able to consolidate your debt if you are eligible to refinance to a debt consolidation home loan. 

If you’re interested in consolidating your debt, speak to your lender directly or through your Home Loan Specialist.  

3. How does debt consolidation work? 

Debt consolidation allows you to roll multiple personal loans into a single monthly repayment at the same rate as your home loan.  

For example, let’s say you have a home loan of $500,000, credit card debt of $5,000 and a car loan of $7,000. Each of these will most likely have different interest rates, repayment amounts and repayment dates. This may be difficult to manage and keep track of. 

If you decided to consolidate these debts into your home loan, you would be able to bundle them together and make a single monthly repayment with a single interest rate. 

Try our Debt Consolidation Calculator to get an estimate of how much you might be able to save by consolidating your debt. 

4. Who do I speak to about debt consolidation? 

You can either speak directly with your lender or ask your Home Loan Specialist to speak to your lender on your behalf. 

5. Is it possible to consolidate all debt into a single repayment? 

Yes, it’s possible to consolidate all of your existing debt into a single monthly repayment. This will depend on your situation, lender and eligibility for a debt consolidation home loan. 

The pros and cons of debt consolidation 

1. Are debt consolidation home loans a good idea? 

Whether debt consolidation home loans are a good idea or not will depend on your financial situation and goals. 

Debt consolidation can benefit you in the following ways: 

• It makes paying several loans much easier to manage 

• It allows you to pay your loans at a lower interest rate, as home loan rates are often much lower than those for personal debts and credit cards 

• It may help improve your cash flow and help you better manage your budget 

But, it’s important to do the math and ensure that consolidating your debt will be cheaper in the long run.   

2. What are the disadvantages of consolidating debt? 

While consolidating your debt has its benefits, it also may have drawbacks. These include: 

• It can extend the loan term for your other debts as it’s paid over the same loan term as your home loan 

• It can result in you paying more interest over time as the repayment term is extended 

• You may lose the flexibility of paying off your additional loans whenever you please, depending on the type of home loan you have 

• You might need to pay Lenders Mortgage Insurance (LMI) if consolidating your debt pushes your Loan to Value Ratio (LVR) above 80% 

Debt consolidation and credit  

1. Can I get a debt consolidation loan with bad credit? 

Yes, it’s possible to get a debt consolidation loan with bad credit, but this will likely limit the lenders you can choose from and may increase your interest rate.  

2. What credit score do I need to consolidate debt? 

There’s no hard and fast rule when it comes to the minimum acceptable credit score for lenders to offer a debt consolidation home loan. 

This number will vary from lender to lender and you may even be able to consolidate your debt with a bad credit score.  

However, the lower your credit score, the fewer your options you’ll have and the more you will need to compromise in terms of lenders and interest rates. 

3. Can debt consolidation hurt my credit? 

Yes, it’s possible for debt consolidation to hurt your credit if: 

• You fail to make your repayments on time 

• Lowering your loan repayment amount leads you to borrowing more 

• You submit multiple applications in a short period of time, as this can be interpreted as a sign of financial instability 

• There are prepayment penalties in place (where a fee charged when you repay a loan before the agreed loan term) 

What are the benefits of consolidating debt?

Debt consolidation is essentially bundling all of your debt with your home loan to make one monthly repayment. Since home loans generally have much lower interest rates than unsecured debts, you could reduce the amount of interest you pay. This can help improve your cash flow and help you avoid defaulting or damaging your credit rating.

In order to qualify for a debt consolidation loan, you’ll generally need to show that you are trustworthy. You can improve your chances of being approved by ensuring you have a good credit score, a stable employment history and evidence of repaying your loans on time.