Benefits of debt consolidation | How to consolidate debt - NAB

What is debt consolidation?

If you’ve found yourself struggling to manage multiple debts from credit cards, personal loans and store cards, you know how stressful it can be to stay on top of your repayments.

Debt consolidation is when multiple debts are rolled into one with a single repayment. This can make your debt easier to manage, help you pay it off faster and can potentially save you money on fees and interest.

How debt consolidation works

Let’s say you owe $2,000 on a credit card and $4,000 on a personal loan. Each debt has a different interest rate, repayment amount and due date you need to remember. And in the case of the credit card, if you’re still using the card it can be difficult to know when your debt will be paid off.

By consolidating both debts into a single personal loan, you’ll have just one debt to manage. The fixed repayment term gives you certainty over when your debt is expected to be repaid. And if the interest rate on the new consolidated loan is lower than the interest rates on your existing debts, you could pay less interest and maybe even be able to pay down your debt faster.

The advantages of debt consolidation

Having one debt consolidation loan usually outweighs the benefits of having multiple smaller debts. Here are some of the advantages of debt consolidation.

Easier to manage your repayments

One loan's easier to manage than multiple loans or cards across multiple providers as there is just one recurring repayment, with a single interest rate. With a fixed repayment schedule, you’ll have greater control of your budget.

A clear timeline

Having just the one loan to pay off gives you a better idea of when you’ll be debt free. This clarity can be a great motivator to help you stay on top of your repayments, save money, and even pay off a little bit extra so you can repay the loan faster.

Get on top of your credit score

Having one debt is easier to manage and can help improve your credit rating. Managing multiple repayments can increase the likelihood of late or missed payments, which can hurt your credit score.

You could save money

By choosing a debt consolidation loan with a lower interest rate than your current debts, you could pay less interest overall. You might also be able to save money on fees or reduce your repayments to give your budget a little extra breathing room.

How to consolidate your debt

Follow these steps to learn how to consolidate your debt.

Step 1. Assess your spending

First, get a clear picture of where your money is going. Look at your debt repayments, as well as all your other regular spending, such as groceries, transport, streaming services and socialising. By doing this you'll be able be able to see where you can save money and perhaps put a little extra towards paying down your debts.

Use our budget planner to help create a realistic budget, and read our tips for creating and sticking to a budget.

Step 2. Consolidate your repayments

Now that you know how much you can afford to pay back, use our debt consolidation calculator to work out the length of your loan and the estimated repayments.

Staying on top of a single repayment is easier to manage, and you’ll be able to choose weekly, fortnightly or monthly repayments to fit with your pay cycle. Keep in mind that the length of your loan term will influence how much interest you pay.

Step 3. Keep on top of your finances

Once you’ve consolidated all your repayments into one, you have a clear end date for your loan. This can be a great way to motivate yourself to pay off your debt. 

Use our financial wellbeing resources keep on track, and learn more about managing your money and managing your financial health.

Ready to apply?

Learn about our personal loans for debt consolidation and apply today.

Explore personal loans

Things to consider

Here are a few additional things you should keep in mind when consolidating your debt:

  • If you switch to a loan with a longer term, even if the interest rate is lower, you may end up paying more in interest and fees.
  • Paying off your debt quickly is important but having a budget you can manage and stick to is as well. Learn more about sticking to a budget.
  • Consider scheduling your repayments to be due right after your pay day to help manage your budget and give you peace of mind.

Personal loan calculators

Use our handy calculators to work out how much you could borrow, what your repayments might be, and how much you could save by consolidating your debts.

Debt consolidation calculator

Understand how your repayments could change by consolidating your debts.

Personal loan repayment calculator

Calculate what your repayments could be with a NAB Personal Loan.

Personal Loan borrowing power calculator

Estimate what you can afford to borrow and how much the repayments will be.

More about personal loans

Personal loan for debt consolidation

Multiple debts can be difficult. Put it all in one place and get a helping hand with a NAB Personal Loan for debt consolidation.

How to pay off your debt

Read our tips to help you pay off your debts.

How to apply for a personal loan online

Learn more about what you’ll need to apply for a NAB Personal Loan.

Get in touch

If you're experiencing a change in your circumstances, require financial hardship assistance, or think you might need help in the future, please contact us.

Request financial hardship assistance

If you’re having trouble making your repayments, you can request assistance.

Submit a form

Call NAB Assist Team

Monday to Friday, 8:00am to 8:00pm (AEST/AEDT)
Saturday, 9:00am to 1:00pm (AEST/AEDT)

1800 701 599

Important information

The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.