Debt Consolidation Loans Explained

When juggling multiple high-interest loans becomes overwhelming, debt consolidation loans can help. These loans allow you to combine multiple debts into a single low-interest loan, making the situation more manageable.

If you’re searching for the best Australian debt consolidation loans, you can apply online through Orange Loans—the best lender-finder in the country! We can save you the hassle of shopping around for the best consolidation loans by connecting you with reputable lenders for your unique situation in record time.

Is this loan right for you? Learn more about this type of loan below and make an informed decision.

What this article covers:

How Do Debt Consolidation Loans in Australia Work?

Consolidating debt with a personal loan in Australia involves finding lenders with the most competitive rates, applying online, and paying all your existing debts once approved. 

Some lenders deposit the funds in your account, while others pay directly to your nominated credit providers. After that, you start making one regular payment to the loan provider.

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Want a 50,000 debt consolidation loan? You’re lucky because most lenders offer $2,000 to $50,000. However, lenders use different criteria to determine how much they can lend you responsibly.

These loans usually have a term between 2–7 years. The longer the repayment terms, the lower the monthly payments. 

Pros and Cons of Consolidating Debt with a Personal Loan

Below are the benefits and drawbacks of using personal loans to consolidate debt:

Pros

  • One single payment is easier to manage
  • It gives you a clear timeline of when you’ll be debt-free
  • It makes budgeting easier 
  • You might free up cash for other financial needs

Cons

  • You can get into more debt if you get more credit than just enough to repay existing debt
  • A longer-term loan with lower rates might cost more overall in the long run

Types of Personal Debt Consolidation Loans

Most lenders allow you to choose between two types: secured and unsecured. Your choice can affect your loan amount, repayment period, and interest rate.

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Secured

A secured debt consolidation loan requires collateral, such as your car or home, that the lender can repossess and sell if you default. Since the lender can cover the loan cost using your asset if you default, secured loans are less risky for the lender. 

Reduced risk makes it easier to obtain secured loans at lower interest rates, higher loan amounts, and longer repayment periods compared to unsecured loans.

If you’re looking for debt consolidation loans Australia bad credit or no guarantor debt consolidation loan, your chances of approval are high if you offer an asset as security.

Unsecured

An unsecured debt consolidation loan doesn’t require using an asset as a security against the loan, making it riskier for the lender if you default. Because of the associated risk, unsecured loans are harder to obtain than secured ones.

Lenders usually assess your creditworthiness and other factors to decide whether or not to offer you an unsecured loan. These loans typically have higher interest rates or lower loan amounts than secured personal loans.

Interest Rates

Most lenders offer a customised interest rate on debt consolidation loans. They evaluate your credit history, income level, repayment schedule, and other factors to determine a suitable rate. 

You can also choose between a fixed and a variable interest rate. 

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With a fixed-rate loan, the rates remain constant throughout the life of the loan. A variable rate loan means the rate could go up or down over the loan term due to market changes and other factors.

One term you’ll come across when comparing interest rates on these loans is comparison rate. It represents the overall loan cost, including the interest rate and other fees.

Debt Consolidation Personal Loan Fees 

Depending on the lender, you might also incur other debt consolidation costs, for instance:

  • A one-time establishment fee or upfront fee added to your loan amount 
  • Monthly or loan management fees
  • Late payment fees
  • Early repayment fees
  • Deferred establishment fees

You should compare the total costs of the loan against your current loans to decide if it’s worth it. Aim to pay less and ensure you can afford your new repayments.

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How Do You Apply?

You can apply for a debt consolidation loan online. The steps depend on the lender of your choice, but finding a reputable loan provider with competitive rates is the major task. 

If you need to find the best loan consolidation providers hassle-free, try Orange Loans. We have a vast network of loan providers in Australia. Submit a simple and quick online application, and we’ll pair you with the best lender for your specific loan needs.

Conclusion

Debt consolidation loans can help you streamline your debt payments, get lower rates, and take control of your financial situation. The first crucial step is finding a reputable, licensed, and responsible lender. You must also consider the overall loan cost to get a favourable deal.

Ready to apply for a debt consolidation loan in Australia? Get the best offers via Orange Loans now!

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