Debt Consolidation Loans

Debt consolidation through a home loan involves combining multiple debts — such as credit cards, personal loans, and car finance — into your existing home loan or a new refinanced home loan. Because home loan interest rates are typically much lower than credit card or personal loan rates (around 6–7% vs 18–22%*), you can significantly reduce your total interest costs and simplify multiple repayments into one. Your full financial situation would need to be reviewed prior to acceptance of any offer or product.

Most consumer debts can typically be consolidated, including credit cards, personal loans, car loans, hire purchase agreements, store cards, and some Buy Now Pay Later facilities. Certain debts such as business loans, margin loans, novated leases, and gambling debts are generally not eligible. Tax debts may be considered on a case-by-case basis by some lenders. Your broker will confirm exactly which of your debts can be included.

This is a valid concern — and the reason a smart broker strategy matters. If you simply added your debts to a 30-year home loan, you could pay more total interest despite the lower rate. That's why we recommend a split loan structure: your consolidated debt goes into a separate sub-account with higher repayments, designed to pay it off in 5–7 years. You get the lower interest rate benefit while clearing the debt faster than the original terms. This strategy typically results in significant interest savings compared to keeping the original debts.

This is one of the most important things to understand: banks typically assess credit cards at approximately 3.8% of the full credit limit per month, regardless of your actual balance. A $20,000 credit card limit is assessed as $760/month in commitments — even if you owe nothing on it. This dramatically reduces your borrowing power, which is why closing unused cards (or consolidating and closing) can be such a powerful financial move.

In most cases, yes. Lenders typically require that credit cards and store cards be closed as a condition of the consolidation. This is actually a significant benefit — closing these accounts removes the assessed commitments from your financial profile (remember, banks assess 3.8% of the full limit) and can substantially improve your borrowing power for future goals like buying an investment property or upgrading your home.

The equity required depends on the lender and the consolidation amount. Generally, if your Loan-to-Value Ratio (LVR) stays at or below 80% after consolidation, you'll have the most flexible options without needing Lenders Mortgage Insurance (LMI). Some lenders allow consolidation up to 90% LVR with LMI. Above 90%, options become more limited. Your broker will assess your equity position and identify the right pathway.

Yes, self-employed borrowers can access debt consolidation, but there are some additional considerations. Certain lenders restrict consolidation when using simplified or one-year income assessment methods — meaning you may need to provide two years of tax returns and financial statements. An experienced broker understands which lenders offer the most favourable pathway for self-employed applicants seeking consolidation.

Buy Now Pay Later (BNPL) facilities are now captured and assessed by lenders as financial commitments. The treatment varies: some lenders treat smaller, short-term BNPL (under $4,000 with terms under 6 months) as a regular expense, while larger or revolving BNPL facilities may be assessed similarly to credit cards at 3.8% of the limit. Fixed-term, non-revolving BNPL may be treated like a personal loan. Consolidating and closing BNPL accounts can help improve your borrowing position.

Debt consolidation can actually improve your credit score over time. By closing multiple credit accounts and maintaining consistent repayments on a single home loan, you reduce your overall credit utilisation and demonstrate responsible financial management. There may be a short-term impact from the credit enquiry and account closures, but the long-term trajectory is generally positive — especially when you're no longer juggling multiple minimum payments.

Absolutely — this is one of the most powerful benefits. Because banks assess credit cards at 3.8% of the full limit per month, $50,000 in combined credit card limits can reduce your borrowing power by approximately $316,000.* By consolidating these debts into your home loan and closing the accounts, those assessed commitments disappear from your profile — potentially unlocking the capacity to purchase an investment property that previously seemed out of reach.