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3 steps to take before you consolidate debt

Consolidating debt with an unsecured personal loan gives you a way to bring a number of debts (including credit cards, personal loans and store cards) into a single loan with one interest rate and repayment schedule to manage.

Debt consolidation doesn’t suit all circumstances, though. Here, we explore a handful of steps you can take to better understand whether using an unsecured personal loan to consolidate debt could help you realise your goals.

  1. Get out the calculator
  2. Review the terms and conditions
  3. Prioritise repayments

1. Get out the calculator

Debt consolidation could save money in some situations but, before you apply, it’s important to make sure it will leave you better off.

The first step is to add up how much you pay to maintain your current debts. Consider fees, interest charges and break costs, then compare these with the costs of the loan you intend to consolidate with.

It’s also wise to calculate how much interest you will pay over the life of your existing loans. Then, compare this with the total interest you’ll pay once you consolidate with a new loan. Remember that a new loan could make the term of your debt longer, which can translate to more interest charges in the long run.

If the total cost of your existing debt looks higher than that of the new loan, debt consolidation might help you.

2. Review the terms and conditions

It might seem like a chore, but it’s essential to read the small print before you make the decision to consolidate debts with an unsecured personal loan.

The terms and conditions often outline features of the loan that will affect its overall cost to you. For instance, your new loan might require you to pay an early repayment fee if you repay the total amount before the loan is fully mature. Alternatively, you might find that the loan you’re looking at gives you the ability to make extra repayments without additional charges, or customise your repayment frequency to match when your salary comes in.

3. Prioritise repayments

Consolidating your debts with an unsecured personal loan can be a practical way to simplify repayments and reduce the amount you pay in interest charges. Simplifying repayments in this way could also help you focus on your obligations and working towards an end-date for your debt. Depending on the loan, you may even be able to make extra repayments occasionally, which allows you to reduce the balance and interest you pay on it, and brings you closer to the loan’s end-date.

In the end, it helps to remember that debt consolidation is a tool. In the right situation, it could help you feel more in control of your repayments and start a plan to end your existing personal debts.


Things you should know

Credit criteria, fees, charges, terms and conditions apply.

Personal Loan Contract Terms and Conditions (PDF 394KB) - for customers approved before 18 March 2024.
Personal Loan Contract Terms and Conditions (PDF 210KB) - ​for customers who apply, or are approved, on or after 18 March 2024.​

More about choosing your loan term

^ Our unsecured Personal Loans have a standard term of 1 to 7 years. If you choose a term greater than 2 years, and pay it out in less than 2 years, there is a prepayment fee of $175. This fee is waived if you pay out your personal loan by re-financing to another Westpac personal loan.