ONE REPAYMENT, BUT AT WHAT TOTAL COST?
Rolling several debts into one repayment can make a month easier to manage. It can also spread a short-term debt across a much longer term and cost considerably more in total interest.
Which of those happens depends on how it is structured and on what changes afterwards. We work through both before recommending anything.
WHAT CONSOLIDATION CAN DO
Reduce Monthly Outgoings
Combining several repayments into one facility can lower the monthly total, because both the rate and the remaining term may change.
Simplify Your Repayments
One repayment on one date, rather than tracking several due dates across several providers with different cycles.
Move Balances to a Different Structure
Secured and unsecured lending are priced and assessed differently. Where sufficient equity exists and lender policy allows, the structure applied to those balances can change materially.
Close the Facilities Being Cleared
Closing the accounts being consolidated is often a lender condition rather than an option. That condition is a large part of what makes consolidation work.
Restore Servicing Capacity
Reducing committed monthly repayments can change what you are assessed as able to borrow for a later purpose, such as a purchase or a renovation.
Set a Plan You Will Actually Finish
Where the consolidated portion can be kept on a shorter term, consolidation becomes a repayment plan rather than a longer-term carry.
WHAT SHAPES THE OUTCOME
Consolidation is the pathway we decline most often. These are some of the factors that decide whether it improves your position or moves the problem somewhere more expensive.
Short-Term Debt on a Long-Term Loan
A short-term debt absorbed into a long-term mortgage can cost more in total interest even at a much lower rate, because it is repaid over a far longer period. We work through the total cost, not just the repayment.
What Happens After Settlement
Consolidation depends on the cleared facilities staying closed. Redrawing on cards afterwards can leave you carrying the old debt and the new one together.
The Cost of Doing It
Payout figures, discharge and application fees, valuation costs and state mortgage registration charges may all need to be allowed for, and they count against the benefit.
Security and What Is at Risk
Unsecured debt moved onto your home becomes secured against it. That changes the consequence of being unable to repay, and it is the single most important thing to understand before proceeding.
Equity, LVR and Cash-Out Policy
Lenders generally treat debt consolidation as a cash-out purpose and apply their own limits, evidence requirements and policy. That policy varies considerably.
Credit File and Recent Conduct
Arrears, defaults and recent applications may all be assessed. A consolidation is a new credit application, not a way around one.
HOW WE APPROACH A CONSOLIDATION
01
List Everything
We establish every balance, rate, limit and minimum repayment, including the ones that are easy to leave off. We cannot assess a position we cannot see in full.
02
Compare Total Cost, Not Just the Repayment
We work through the consolidated structure against leaving things as they are, across the full term, and compare both.
03
Structure It So It Finishes
Where consolidation stacks up, we work through the term and, where suitable, splitting the consolidated portion so it is repaid rather than carried for decades.
WHEN CONSOLIDATION ISN'T THE ANSWER
Direct Broker Access
You deal with Christian directly through the review and, if you proceed, through to settlement.
The Full Picture Before a Recommendation
We would rather spend an hour on the numbers than arrange something that leaves you worse off years later.
Independent Support Where That Is What You Need
If the issue is financial hardship rather than loan structure, taking on more credit may not be appropriate. In that situation, we may suggest speaking with a free, independent financial counsellor instead.
If you are experiencing financial hardship, free and independent financial counselling is available through the National Debt Helpline on 1800 007 007.
CONSOLIDATION CAN FORM PART OF A REFINANCE
Debt consolidation can form part of a home loan refinance, so the two decisions may need to be assessed together — the home loan itself, the structure, and the debts being cleared. If you are already reviewing your home loan, we can consider the consolidation alongside it.
EXPLORE THE NUMBERS
Use our calculators to explore indicative repayments and how different loan amounts and terms could affect your budget. Then speak with us about how the figures fit your circumstances.
Lower repayments do not necessarily mean a lower total cost, particularly if the loan term is extended.
Estimates are a guide only, not a lending assessment or approval.
COMMON QUESTIONS ABOUT DEBT CONSOLIDATION
Can I consolidate credit card debt into my home loan?
In many cases it is possible, subject to equity, servicing and lender policy. Lenders generally treat consolidation as a cash-out purpose and may ask for payout figures and evidence of the debts being cleared. The important consideration is not whether it can be done but whether it should: the balances move from unsecured facilities onto lending secured by your property, and they are usually repaid over a much longer period. We work through the total cost over the full term before recommending it.
Does debt consolidation affect your credit score?
A consolidation involves a new credit application, so a credit enquiry may be recorded on your credit report. The effect on a credit score varies between people. Closing the facilities being consolidated also changes your credit profile, and lenders may consider recent applications and your repayment history as part of the assessment. None of that makes consolidation bad for your credit — it means the application is something to do deliberately rather than speculatively.
Does consolidating debt into a mortgage cost more overall?
It can, even at a lower interest rate. A balance repaid over a much longer period can attract more total interest than the shorter facility it replaced, so a lower repayment does not automatically mean a lower total cost. That is the calculation people most often miss. Where the consolidated portion can be kept on a shorter term or split separately, the outcome can be different. We compare the total cost over the full term against leaving the debts where they are.
Do I have to close my credit cards after consolidating?
Often, yes. Closing or reducing the facilities being consolidated is commonly a lender condition rather than a suggestion, and the requirement is usually documented as part of the approval. Lender policy varies on whether accounts must be closed entirely or limits reduced. Beyond the policy, the condition matters practically: if the cleared facilities are used again, the consolidated debt and the new balances both remain, which is the most common way consolidation ends up worse than doing nothing.
Can I consolidate debt if I have a default or arrears?
It may be possible, but the available options are usually narrower. Lenders assess credit conduct as part of any consolidation, and recent arrears, defaults or a pattern of applications can affect both eligibility and pricing. Some lenders will not proceed at all, while others may consider the position with an explanation and supporting evidence. We assess the actual credit position against relevant lender policy before anything is lodged, and will say plainly if there does not appear to be a suitable pathway.
What is the difference between debt consolidation and a debt agreement?
They are different things. Debt consolidation is a credit product: an existing set of debts is repaid by a new loan, and the new loan is repaid in the ordinary way. A debt agreement is a formal arrangement under the Bankruptcy Act with its own legal consequences, administered by a registered debt agreement administrator. AGFB arranges credit and does not provide debt agreements, informal arrangements or insolvency advice. If that is the pathway being considered, it should be discussed with an appropriately qualified professional.