What is debt consolidation?

While it may sound intimidating, debt consolidation is a simple financial strategy that can help you better manage your debts by rolling them into one loan. One loan, one monthly repayment, one interest rate … sounds pretty good, right?

What's in this guide?

What is debt consolidation?

Debt consolidation is when you take out one loan to pay off multiple debts. 

This can help you to simplify the juggling act of paying off multiple debts, as it allows you to make one monthly payment instead of many to different creditors.

On top of this, debt consolidation can also help reduce the overall interest and fees you are paying on multiple debts.

How does debt consolidation work in Australia?

In Australia, debt consolidation typically involves taking out a loan to pay off multiple credit card debts and other unsecured loans. 

You can consolidate your debts with a Wisr loan, your bank, credit union or an online lender.

When consolidating your debts, it's important to look for a loan with a low-interest rate start the process by getting a rate estimate with Wisr, as this will help reduce the overall cost of your loan. It's also important to consider any loan fees, such as establishment fees and ongoing fees as these might cost you
Read more about how debt consolidation works.

What are the pros and cons of debt consolidation?

There are multiple pros and cons to consolidating your debts, so it’s important to do your research first. 

  • Some benefits of debt consolidation are: 
    • It simplifies the process of paying off multiple debts.

    • It can reduce the overall interest and fees you pay.

    • It can help you to better manage your debt, and good debt behaviour can improve your credit scores.

    • It can help you to manage your money more effectively.

  • Some risks of debt consolidation include:
    • It probably won’t address the underlying issues that led to the accumulation of your debt.

    • It can lead to an increase in overall debt if you continue using credit cards, buy now pay later, or take on new loans. 

    • It can have a negative impact on credit scores if not managed properly.

    • Opting for a longer loan term on your debt consolidation may mean your monthly repayments are lower, however, it could also take you longer to pay off.

Is debt consolidation wise?

Debt consolidation can be a valuable financial strategy if you have multiple credit card debts, personal loans, or other types of unsecured debts. 

It can simplify the process of paying off your debts, reduce overall interest and fees, and improve credit scores. 

However, it's important to consider the pros and cons and address any underlying issues that led to the accumulation of debt.

To assist Australians with their financial health, we offer Wisr App, designed to help you pay down your debts and improve your relationship with your finances.

Note: It is important to note that debt consolidation is not suitable for everyone, and not all debts can be consolidated. It can help to seek guidance from a financial advisor or credit counsellor to determine if debt consolidation is the right option for you.

To learn more, read why consolidate your debt.


What types of debt can I consolidate? 

Debt consolidation loans are usually used for high-interest credit cards.

There are some instances where other debts can also be consolidated but it’s important to do your research and chat with your lender. 

Does debt consolidation hurt my credit scores? 

A debt consolidation loan requires a hard enquiry on your credit so yes, it will affect your credit scores.

Making your repayments on time and paying off your debts are good financial habits that can improve your credit scores over time

How do I apply for a debt consolidation loan? 

You can apply for debt consolidation with Wisr, any Australian bank, credit union or online lender. 

Why not get a free rate estimate now? taking a look won’t hurt your credit scores.

How do I know if I’m eligible? 

The first step is to check your credit scores and credit history. 

You can check your scores for free with Wisr and request your credit report from Equifax, illion or Experian. 

Once you know where you stand, do some research and work out which lender is right for you. 

Different lenders may have different eligibility criteria so it’s best to view each one separately. 

Once you’ve settled on a lender, get a free rate estimate and apply for your loan.

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Disclaimer: This article contains general information only, and is not general advice or personal advice. Wisr Services does not recommend any product or service discussed in this article. You must get your own financial, taxation, or legal advice, and understand any risks before considering whether a product or service discussed in this article may be appropriate for you. We have taken reasonable efforts to ensure that the information is accurate at the time of publishing, but the information is subject to change. We may not update the article to reflect any change.

Joanne is a respected leader of multiple disciplines within Banking, with 17+ years’ experience ranging from credit risk, product management, pricing, analytics and strategic project delivery.

Joanne, Chief Operating Officer