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Debt Consolidation
Consolidate Your Debts Into Your Home Loan
Rolling high-interest debts — credit cards, personal loans, car loans — into your home loan can dramatically reduce your monthly repayments. It’s not right for everyone, and we’ll tell you honestly whether it makes sense for your situation.
Overview
How Debt Consolidation Works
Debt consolidation is a specific kind of refinance — you increase your home loan amount (within your borrowing capacity and LVR) to pay out higher-interest debts, leaving you with one consolidated repayment at the home loan rate instead of multiple smaller payments at much higher rates.
The economic logic is straightforward. Credit cards typically charge 18%–22% interest. Personal loans run 9%–15%. Car loans 6%–10%. Home loans currently sit in the 6%–7% range. Moving $50,000 of credit card debt from 20% to 6.5% saves you roughly $6,750 per year in interest, freeing up cash flow.
There’s a serious trade-off, though. By rolling short-term debts (credit cards, personal loans, cars) into your 25–30 year home loan, you stretch the repayment period out enormously. Unless you keep making higher repayments to pay the consolidated debt off faster, you can end up paying more in total interest — just at a lower rate over a much longer time.
We model this honestly. We’ll show you what the consolidation saves you in monthly cash flow, what it costs in total interest over the life of the loan if you only make minimum repayments, and what you’d save by maintaining your current repayment dollar amount rather than dropping to the new minimum.
Key Features & Benefits
What Debt Consolidation Can Achieve
Reduce Monthly Repayments
Replace several high-cost repayments with one lower repayment at home loan rates. Monthly cash flow improvement is often $500–$1,500 depending on the debts being consolidated.
Simplify Finances
One repayment, one due date, one lender — instead of juggling cards, personal loans, car loans and your mortgage across multiple providers.
Lower Interest Rate
Home loan rates are typically 10–15 percentage points below credit card rates and 3–8 below personal loan rates. The rate reduction is the core benefit.
Bad Debt → Good Debt?
Tax-deductible only if the original debt was for income-producing purposes. Consumer debts (cards, cars) don’t become deductible by being rolled into the home loan — your accountant will explain.
Maintain Your Repayment Amount
The biggest hidden win is keeping your monthly outlay at the pre-consolidation level even after the rate drops. That pays the debt off years earlier.
Honest Cost-of-Capital Analysis
We show you what consolidation actually costs over the life of the loan, not just the headline monthly saving. If consolidation isn’t right for you, we’ll say so.
Is This Right for You?
Is Debt Consolidation Right for You?
The Process
Debt Consolidation Process
Debt & Equity Review
We list out all your current debts — credit cards, personal loans, car loans, BNPL, store credit — and confirm your home’s equity position. This sets the realistic consolidation envelope.
Honest Modelling
We show you, in real dollars, what consolidation saves monthly, what it costs over 30 years at minimum repayments, and what maintaining your current repayment level saves in total.
Lender Selection
We compare consolidation-friendly lenders — not every lender will consolidate $50k of credit card debt at 95% LVR. We narrow to lenders likely to approve at competitive pricing.
Application & Approval
We submit the application with the debt-payout details. The lender pays each old debt directly at settlement — you don’t see the money.
Close the Old Facilities
After settlement, we help you confirm the credit cards and personal loans are closed (not just paid off and kept open — that’s the trap). Closing them prevents the worst outcome: re-running the debts.
FAQ
Debt Consolidation Questions
Will consolidation hurt my credit score?
Consolidation involves a credit enquiry (a small short-term dip), then closing several accounts (a small short-term dip), then steady on-time repayments on the consolidated loan (a longer-term improvement). Net effect after 6–12 months is usually neutral or positive, provided you don’t reopen the closed lines.
How much can I consolidate?
Depends on your equity, income and the lender. Most consolidations are capped at 80% LVR (above that requires LMI, which usually wipes out the savings). On a $700k home with a $300k loan, you can typically consolidate up to $260k of additional debt within an 80% LVR envelope — though serviceability is usually the binding constraint.
Will I pay more interest in total by consolidating?
If you drop to minimum repayments on the new larger home loan and don’t pay it off faster — yes, often significantly more in total over 25–30 years. If you maintain your current total monthly repayment level and let the lower rate work for you, you’ll typically pay off the consolidated debt years earlier and save substantially in total interest.
Can I consolidate tax-deductible investment loans?
Yes, but it usually doesn’t make sense to mix deductible (investment) debt with non-deductible (owner-occupier) debt in the same facility. We structure splits to preserve the deductibility of your investment portion — your accountant will confirm the treatment.
What if I have a bad credit history?
Consolidation with bad credit is harder but not impossible — specialist lenders take a more flexible view. The trade-off is higher rates than standard lenders, which can erode the consolidation benefit. We assess honestly whether consolidation through a specialist lender still saves you money in your situation.
See If Consolidation Makes Sense
Free consultation. We’ll list your current debts, calculate the realistic saving and tell you honestly whether consolidation is the right move or not.
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