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Debt Help: Tips to Consolidate your Debt

Explore different debt consolidation options and if it’s the right decision for you.

August 2020 – 4 minute read

Key takeaways from this article:

  • What is debt consolidation?
  • Is debt consolidation the right option for you?
  • How can you consolidate your debt?
  • Helpful habits to get out of debt


Many people feel overwhelmed by their debt repayments, particularly if they have several loans with different lenders, making staying on top of repayments complex. If you fall into this category, you may be able to reduce your financial stress, make your repayments more manageable and potentially reduce the cost through debt consolidation. Getting some help with debt can provide you with an opportunity to improve your financial situation.

Westpac’s financial education experts explain what debt consolidation is, what you should consider, how you could consolidate your debt and some habits to form to get on top of debt.

What is debt consolidation?

Debt consolidation involves combining your outstanding debts into one loan. The advantages of debt consolidation could be:

  • Convenience, as you will only have one regular repayment to make and one loan balance to track,
  • Potentially lowering the total amount of your regular repayments, by finding a lower applicable interest rate, making your debt more manageable, and
  • Potentially lowering your exposure to fees, you may pay.

Is debt consolidation the right option for you?

Before deciding to consolidate your debt, make sure it is the right option for you. Compare the repayment amounts, interest rates, fees, charges and terms and conditions of your current loans and other debts with the prospective loan. Also remember to account for other costs that may be associated with debt consolidation, including break costs (or early repayment fees) on existing loans.

Gather information about all your personal outstanding debts by reviewing your bank statements, terms and conditions or by talking to your bank and find out:

  • How much you owe on each debt,
  • The interest rate you are paying on each debt,
  • The monthly fees that you might be paying on each debt,
  • Whether you are able to repay your debt early, and
  • Any break costs that are payable.

How can you consolidate your debt?

Once you have decided that debt consolidation is the right option for you, it’s important to know how much you can realistically afford to repay each month. Our Budget Planner can help you work out where your money is going and how much you can afford on the new loan repayments.

Here are 3 options to help consolidate your debt that we can offer:

1. Transferring the balances of all credit, charge or store card debts onto a low rate credit card and, if possible, one that offers 0% p.a. interest for a period of time such as 20 months offered by Westpac’s Balance transfer card. With this option you may:

  • Eliminate additional card fees, assuming you cancel your other cards.
  • Streamline your banking and credit card management with only one statement and one payment.
  • Stay on track utilising a repayment plan like SmartPlan. SmartPlan is a repayment planner for Westpac personal credit card customers which helps you split your repayments into manageable instalments. 


Further, your credit report will reflect this change to your active accounts.

The balance transfer option requires a disciplined approach as there is no set repayment amount. We recommend you remain focused by putting a plan in place to pay off the entire balance during the interest free period. Setting up a scheduled recurring payment can help you to keep up with your billing cycle - that way, you will not miss a credit card repayment.

Find out more about using balance transfers.

2. A personal loan for debt consolidation. This option enables you to lock in your interest rate over a fixed term and you will know what your repayments will be for the life of the loan. By combining your debts into one loan you may potentially:

  • Save money by eliminating multiple fees,
  • Take advantage of a lower interest rate when compared to your existing debts, and
  • Make your banking easier to manage.


More about our personal loans.

3. If you are a home owner with a mortgage, you can use a home loan top-up or redraw facility on your existing home loan to borrow at a lower interest rate than most credit cards or personal loans. With this option you could potentially:

  • Reduce the overall amount you pay across all your debts each month, and
  • Simplify your financial management with only one monthly repayment.


With a home loan top-up or redraw your mortgage repayments will usually increase to pay off the loan amount within your remaining loan term. However, this increase should still be less than your combined existing debt repayments. Depending on the interest rates you were paying, the types of debts you are consolidating and the length of your remaining home loan term, if you only make the minimum repayments on your home loan, you may end up paying more interest on your debts over the term of the loan. 

Helpful habits to get out of debt

Debt consolidation is not debt elimination or forgiveness. It is simply a way of simplifying your repayments and potentially lowering the amount of interest you’re repaying over time. It is important to develop the right financial skills to avoid an overreliance on debt help services such as debt consolidation. Establishing good money habits can help you to stay out of debt and help build new opportunities for you and your family. Here are some small steps to help you become debt free:

Choose a reward for getting out of debt.

Dangling a carrot in front of yourself will give you the motivation and impetus to pay off your debt. Sticking a photo on your fridge of a reasonable reward (i.e. a nice dinner or new pair of shoes) may help keep you focussed on your payment goals.

Know your budget.

If you understand how you’re spending your money today, you’re better able to know how much you can afford to pay off your debts.

Set up an emergency fund.

An emergency fund will give you peace of mind if unexpected expenses pop up and reduce your reliance on credit cards.

Negotiate your repayment plans.

Make a phone call to your lending institutions and ensure that your repayment plan is suited to your lifestyle.

Use the snowball method.

Slow and steady wins the race when it comes to getting out of debt. The snowball method refers to paying off your debts in order of smallest to largest. This approach can make the process less overwhelming and provide you with an ongoing sense of accomplishment. To get the snowball rolling, add the repayments from the paid-off debts to the next smallest debt until they are all cleared.

Or the avalanche method.

Much like the snowball method, once you’ve paid off the debt with the highest interest rate first, add that repayment onto the debt with the next highest interest rate until it is paid off. The benefit of the avalanche method is that you save money by reducing your interest payments.

Make extra debt repayments.


 If you’re trying to clear your debts quickly and pay less interest and fees, its necessary to make additional repayments, more than the minimum each month. Even if it is only a little more it will help.

Change the way you spend.

We have put together a list of thought starters in our cost-cutting checklist (PDF 191KB) to help you reduce your expenses.

Commit to putting windfalls towards debt.

The next time you receive a tax refund or cash bonus, commit to putting a portion or the full amount of the funds towards your debt payment efforts.

Sharpen your financial skills.

 This will help you by giving you the knowledge to make better decisions with your money and avoid credit card debt.  Check out the tips and tools on our “Master your money’ webpage.

This article is from Westpac’s financial education specialists, continuing the legacy of Sir Alfred Davidson in helping you create a better financial future. 

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Things you should know

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice.

© Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.