Compare paying off your current debts separately versus consolidating them into a single new loan.
This calculator compares two scenarios side by side: continuing to pay your existing debts separately (each at their current minimum payment), versus consolidating all balances into a single new loan at a lower rate and fixed term. It shows the total interest paid, monthly payment, and payoff timeline under each approach — helping you decide whether consolidating your debts is actually cheaper overall.
The "current debts" scenario simulates each debt paying down at its minimum payment, tracking total interest across all debts. The "consolidation loan" scenario models a new single loan at the consolidation rate for the total combined balance, using the standard amortisation formula for a fixed monthly repayment over the chosen term.
Example: Debt 1: A$5,000 at 20% (min A$150). Debt 2: A$8,000 at 12% (min A$200). Total balance = A$13,000 and total minimum payments = A$350/month. Continuing at minimum payments: payoff takes up to 52 months, with total interest of approximately A$4,626.83. Consolidating into a 10% loan over 5 years (60 months): monthly repayment ≈ A$276.21, total interest ≈ A$3,572.69 — a saving of roughly A$1,054 in interest. (Note: this example is for illustration purposes only — actual results depend on your specific debt details and consolidation loan terms.)
Debt consolidation is the process of combining multiple debts into a single loan, typically at a lower interest rate or with a simplified single monthly payment. In Australia, the most common forms of debt consolidation include: an unsecured personal loan (from a bank, credit union, or online lender) to pay out credit cards and other consumer debt; a home equity loan or line of credit (which uses equity in your property as security to access a lower rate); or refinancing your home loan to a larger balance and using the additional funds to clear other debts. While consolidating high-rate debt (like credit cards) into a lower-rate personal loan can save interest, consolidating into your home loan carries a risk: home loan terms are typically 20-30 years, and spreading consumer debt over such a long term (even at a lower rate) often results in paying far more total interest than clearing the consumer debt in a shorter timeframe. If you consolidate into your home loan, the critical move is to maintain the higher repayment you were making before — directing the difference to offset or extra principal repayments — rather than simply reducing your minimum payment. All debt consolidation loans for Australian consumers must be provided by licensed credit providers under the National Consumer Credit Protection Act, and lenders must assess that the loan is "not unsuitable" for your situation. ASIC's MoneySmart website has guidance on debt consolidation options and free resources for comparison.
Applying for a consolidation loan creates a credit enquiry on your file, which can have a small, temporary effect on your credit score. If the consolidation results in you closing multiple credit card accounts (reducing your total available credit), this could also affect your score in the short term. However, consistently making repayments on the new consolidated loan and clearing your previous debts should improve your credit profile over time. Under Australia's Comprehensive Credit Reporting system, your repayment history is the most significant factor in your credit score.
Consolidating into a home loan (by refinancing or using a home equity loan) typically offers a lower interest rate, but spreads debt over a much longer term — often 20-30 years — meaning you pay interest for far longer, which often outweighs the rate benefit. Consolidating into a personal loan at 8-12% over 3-5 years is typically more cost-effective for consumer debt, as the shorter term limits total interest even if the rate is higher than your home loan rate. The key question is always: how much total interest will I pay, not just what is the monthly repayment.
High-interest consumer debts — credit cards, store cards, personal loans — are the most suitable candidates for consolidation into a lower-rate product. Home loans, car loans on lower rates, and HECS-HELP debt are generally not good candidates. HECS-HELP in particular has no interest (only CPI indexation), so consolidating it into a loan with an interest rate would be counterproductive. Also avoid consolidating tax debts (ATO payment plans can sometimes be more flexible) without specialist advice.
Consolidating unsecured consumer debt into your home loan converts it to secured debt — your home is now at risk if you cannot make repayments. Additionally, spreading short-term consumer debt over a long home loan term, even at a lower rate, typically results in significantly more total interest paid. If you do consolidate into your home loan, it is critical to maintain higher repayments rather than "saving" the difference — use the freed-up cash flow to make extra home loan repayments, not for additional spending.
You cannot consolidate HECS-HELP debt into a bank loan — HECS-HELP is a government debt that cannot be discharged except through repayment to the ATO. Voluntary repayments on HECS-HELP reduce the indexed balance (there is no interest, only annual CPI indexation). For most Australians, HECS-HELP should not be prioritised over high-rate consumer debt, but if CPI is running high and your income is above the compulsory repayment threshold, voluntary repayments may be worthwhile — consult a financial adviser.
Key fees to check: the establishment fee on the new consolidation loan (often 1-5% of the loan amount), any ongoing monthly account fees, and — if consolidating credit cards — any balance transfer fees (1-3%) if using a balance transfer product. If consolidating into your home loan, watch for discharge fees from your current lender, government mortgage fees, and any new loan application or settlement fees. All these fees increase the effective cost of consolidation and should be factored into your comparison alongside total interest.
Disclaimer: The information and figures provided on this page are for educational and illustrative purposes only and do not constitute financial advice. This calculator simulates debt consolidation scenarios using the inputs provided and does not account for establishment fees, ongoing fees, early repayment penalties on existing debts, or changes in interest rates over time. Actual consolidation loan rates, terms, and eligibility depend on your credit history and the specific lender. Consult a qualified financial adviser or credit counsellor before making debt consolidation decisions.