How this lending option works
Debt consolidation replaces several debts with one facility. It can simplify repayments and improve short-term cash flow, but it only works if the total cost, repayment term and security risk are properly controlled.
- Compare total cost, not only repayments
- Set an appropriate repayment strategy
- Consider fees, security and behavioural risk
Compare total cost—not only the new repayment
Credit cards, personal loans, buy-now-pay-later balances and car debt may carry higher rates than a home loan. However, repaying them over a much longer home-loan term can increase total interest even when the rate and monthly repayment are lower.
Understand the security risk
Consolidating unsecured debts into a mortgage makes your home security for those debts. If repayments cannot be maintained, the secured property may be at risk. Borrowers already experiencing hardship should contact their lenders' hardship teams or a free financial counsellor rather than relying only on a refinance.
Build a repayment and credit-limit plan
We compare balances, rates, fees and remaining terms, then model a repayment period designed to avoid unnecessarily extending the debt. Reducing or closing repaid credit limits and keeping the consolidated balance in a separate split can make the plan easier to follow.
Common questions
Will debt consolidation reduce my repayments?
It may, but the reduction can come from a lower rate, a longer term or both. A longer term can increase the total amount repaid, so both repayment and total cost need to be compared.
Can I consolidate debts into my home loan?
Potentially, if there is sufficient equity and servicing and the lender accepts the debts and purpose. Approval is not automatic, and your home becomes security for the consolidated amount.
Should I close credit cards after consolidation?
Reducing or closing limits can help prevent the balances from building again and may improve future borrowing capacity. Consider emergency cash-flow needs before closing every facility.
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