How to Consolidate Debts: Simple Strategies to Regain Control

Updated: 30th April, 2025

Struggling to manage multiple repayments? Learning how to consolidate debts could be the key to simplifying your finances and reducing long-term interest. This guide breaks down the exact steps to consolidate your debts, followed by expert insights on whether it’s right for you—and how to avoid common traps.

Quick Summary

• Combine multiple debts into a single manageable repayment
• Choose from options like balance transfers, refinancing or personal loans
• Lower your overall interest and gain control over your finances
• Avoid new debt and stick to your plan to see results
• Speak with a broker to compare your consolidation options

What Is Debt Consolidation?

Debt consolidation means combining multiple debts—like credit cards, store cards, personal loans, or payday loans—into a single loan with one regular repayment.

So, how does debt consolidation work? Instead of juggling several due dates, lenders, and fees, you take out one new loan to pay off the others. This streamlines your repayments and may lower your total interest cost.

5 Effective Debt Consolidation Strategies

There’s no one-size-fits-all approach, but here are five proven methods that Australians use to consolidate debt:

1. Credit Card Balance Transfer

Transfer your credit card balances to a new card with a low or zero interest rate for a promotional period. This method is best if you can pay the full amount before the rate reverts.

Pros: No interest for a set period

Cons: High interest kicks in after the promo ends

2. Personal Loan for Debt Consolidation

Apply for a personal loan designed to cover your existing debts. Use the funds to repay all your current loans, then focus on one predictable repayment schedule.

Pros: Fixed rate and term

Cons: You’ll need a good credit score to get the best rates

3. Refinance Your Home Loan

If you own property, refinancing your mortgage to access equity can be an effective way to repay credit cards or personal loans.

Helpful reading: Pros and cons of refinancing

4. Home Equity Loan

Use your property’s equity to take out a new loan, which can be used to clear higher-interest debts. Caution: your home is the security for this loan.

5. Debt Settlement (Last Resort)

Negotiate with creditors (or use a debt settlement company) to settle your debts for less than you owe. This method may impact your credit score.

Is Debt Consolidation Right for You?

Consolidating debts can simplify your life—but only if the new loan fits your budget and goals.

Ask yourself:

• Can I qualify for a lower interest rate?
• Do I have a steady income to meet repayments?
• Am I ready to change spending habits to avoid future debt?

If the answer is yes, debt consolidation could be a smart move. But always compare your options or speak to a broker before locking anything in.

Helpful reading: What to ask a mortgage broker

Pros and Cons of Consolidating Debt

Below is a snapshot of the main advantages and disadvantages to weigh up:

Why Australians Consolidate Their Debt

1. To save on interest

Multiple debts mean multiple interest rates. Combining them can lower your total repayment.

2. To simplify repayment

Fewer lenders = fewer dates and less chance of missed payments.

3. To gain control

A clear end date and structured plan can help you feel in control again.

4. To support new habits

Debt consolidation can help you reset and build better financial habits over time.

Refinancing vs Debt Consolidation: What’s the Difference?

Though they sound similar, they have different goals:

• Debt consolidation combines multiple debts into one loan.
• Refinancing replaces an existing loan with a new one to get better terms.

You can also refinance your mortgage and use equity to consolidate debts, making this a hybrid strategy.

Smart Tips for Staying Debt-Free After Consolidation

Consolidating debt is step one. Staying debt-free is the goal. Here’s how:

• Stick to your new repayment plan
• Avoid adding new debt (especially credit cards)
• Set reminders or automate payments
• Review your budget monthly
• Seek advice early if you’re falling behind

Helpful reading: Emergency fund guide

Final Thoughts

Knowing how to consolidate debts is a powerful step toward financial peace of mind. But getting it right means choosing the best method for your situation—and working with someone who has your long-term goals in mind.

At Quantum Finance, we’ll help you compare your options, avoid hidden fees, and secure a loan that works for you—not just your lender.

Need help consolidating your debts?

Get in touch with our mortgage brokers in Perth today.