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Debt consolidation loan for your credit card debt
Have you been declined a balance transfer for your credit card debt? Perhaps you just want a straightforward loan with a fixed rate and a set repayment date?
Eligibility for a loan
To ensure a seamless loan application process, please make sure you meet the minimum eligibility requirements.
- Be an Australian citizen or a registered resident of the country
- Be willing to undergo a credit check (Bear in mind, there are many lenders who provide loans to individuals with bad credit)
- Currently employed or earning at least $350 per week
- Earn more than 50% of your income from sources other than Centrelink
- Have an Australian home address
- Have a contact number or email address
- Have a valid form of ID
- Have proof of income (payslips, bank statements)
What is credit card debt consolidation?
Credit card debt consolidation means you move the balance of one or more credit cards to a fixed-term personal loan with a lower interest rate and a set repayment schedule for clearing the debt.
The idea behind debt consolidation is to simplify your credit card debts and reduce how much you're paying in interest and fees, whether it's a personal or business credit card.
This then enables you to pay off the debt faster than if you were paying off multiple credit cards. The other way to consolidate credit card debt is to use a balance transfer credit card.
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Key benefits of debt consolidation for credit cards
Consolidating credit cards can be particularly beneficial, because:
- Credit cards can come with very high interest rates. Moving your debt to a personal loan brings the potential for a lower interest rate.
- You will have a single regular repayment to make and this amount will stay the same during the loan term (if you opt for a fixed rate personal loan).
- Instead of an open-ended credit card contract, you will have a fixed time-frame for repaying the debt, with loan terms from 1-7 years available.
- Once you consolidate the debt, it’s not as easy to accumulate new debt as it would be if you had a credit card.
- You can also consolidate other debts you have (e.g. Buy Now Pay Later) into the same single loan.
- You can usually make extra repayment to repay the debt early if you can afford to (watch out for fees that may apply on some loans).
- All of this can make it easier, cheaper, or faster to repay your credit card debts.
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How to consolidate your credit card debt
If you’re consolidating credit card debt into a personal loan, these are the steps that are typically involved:
- Calculate your debt consolidation loan total by adding up your total debts.
- Compare debt consolidation loans from different lenders.
- Ensure you’re eligible to apply (e.g. check your credit score).
- Make an application with the lender or use a personal loan broker if you’re not comfortable going it alone.
- Provide supporting documents to show you can afford the repayments (e.g. payslips and bank statements).
- If you’re approved, the lender will arrange to clear your credit card debts or transfer funds to you so you can repay the balances.
- Cancel the credit cards or cut them up to not use them again.
- Begin repaying the debt consolidation loan.
How to apply and get the best credit card debt consolidation
Of course, you’ll only get the benefits if you’re careful with choosing the right credit card refinance loan.
- Make sure you only apply for the amount of money you are consolidating. Avoid taking on extra debt.
- Find a debt consolidation loan with the lowest interest rate and fees you’re eligible for. This won't necessarily be a lender's lowest ‘advertised rate'.
- Try to find a lender who will let you set the day you make your repayments. Then set the repayment to match when you get paid.
- Consider choosing the shortest loan term you can afford as this will save you money on interest.
- Before you cancel your credit cards, make sure you're aware of any cancellation fees and any insurance that comes with the card you may lose.
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Can you get a debt consolidation for credit card debt with bad credit?
If your credit score is below average, getting approved for a credit card debt consolidation loan might feel tricky, but it’s not impossible. There are specialist lenders in Australia who work with a wide range of borrowers, including those with bad credit.
These lenders may not always advertise bad credit debt consolidation loans openly, as they often come with higher interest rates and additional fees. Still, they can be a viable option if the rate is considerably lower than the rate(s) on your credit card(s), and if the loan has flexible terms to pay it off earlier without incurring penalty fees.
What lenders consider when assessing your application:
- Your current income and ability to meet repayments
- The severity of your credit issues (e.g. late payments vs defaults)
- Your debt-to-income ratio
- Whether the loan is secured or unsecured (secured personal loans are usually easier to qualify for and may come with lower rates)
