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Do you have different types of debt and want to simplify your finances? You can streamline your debt into a single monthly payment through the debt consolidation process.

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## What is debt consolidation?

[Debt consolidation](https://www.lendi.com.au/home-loans/debt-consolidation/) is the process of merging your various debts into your home loan. This means that instead of making individual repayments for your home loan, car loan and credit card, you just need to make a single combined monthly or fortnightly repayment. 

By consolidating debt with your home loan, you will be subject to the generally lower interest rate of your home loan. With credit card interest rates typically well-exceeding 10%, you could save money and alleviate the stress of worrying about missing repayments. This way, you can enjoy the benefits of a longer repayment term and lower interest rate. 

Consolidating your debt doesn’t mean that you’ll be repaying those debts over the course of your remaining home loan term. You can choose the timeframe with which you must repay your consolidated debt within your home loan. For example, if you have 15 years left on your home loan, you could set a 3 year repayment term for your consolidated debt. This ensures that you are less likely to pay more in interest.

- __Related:__ [How to get (and stay) financially fit this year](https://www.lendi.com.au/inspire/finance/how-to-get-financially-fit/)

## What types of debts can I consolidate?

There are three kinds of unsecured debts that you can consolidate with your home loan: 

- Car loans
- Personal loans 
- Credit cards

Each of these credit products comes with a higher interest rate and shorter repayment period compared to most home loans. 

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## How can I consolidate my debt?

In order to consolidate your debt, you need to refinance your home loan. In order to be eligible for a new debt consolidation loan, you need to show that you are a reliable borrower that the bank can trust to make repayments on time. You will need to demonstrate that you have:

- A healthy credit rating
- Proof of regular, on-time home loan repayments in recent months
- Proof that you’ve paid your loans and credit card on time in recent months
- A verified stable income
- Adequate home equity

If you don’t meet the above criteria, you may be able to consolidate with a specialist lender that offers non-conforming loan options. Bear in mind, these lenders may charge higher interest rates and loan establishment fees. 

Lendi can guide you through the process of consolidating your debt and refinancing. Get in touch with a [Home Loan Expert](https://www.lendi.com.au/book-appointment/) today to find out what your options are. 

- __Related:__ [How to get (and stay) financially fit this year](https://www.lendi.com.au/inspire/finance/how-to-get-financially-fit/)
- __Related:__ [6 ways to improve your credit score quickly](https://www.lendi.com.au/inspire/finance/6-ways-to-improve-your-credit-score-quickly/)

## Pros of debt consolidation

- Having a single monthly or fortnightly repayment helps you better manage your finances
- You are less likely to miss repayments if you only need to make one per month or fortnight
- Home loan interest rates are lower than interest rates for most other credit products (e.g. credit cards, personal loans)
- You could save on interest, if your new debt consolidation home loan is well-structured
- You benefit from an improved cash flow, which allows you to have more money to spend on what you want and need.

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## Cons of debt consolidation

- A poorly-structured debt consolidation loan could lead you to pay more in interest over time. It’s important to consider the repayment period for your consolidated debt
- You may be subject to standard refinancing costs (e.g. exit fees, application fees). Work out if the [benefit of refinancing](https://www.lendi.com.au/inspire/finance/how-do-you-determine-if-its-worth-refinancing/) and consolidating outweighs any fees involved. 

## What else to consider when consolidating your debt

- It’s a good idea to check that your credit card has been cancelled after settling your debt consolidation loan so that you don’t accrue more debt
- To ensure that a debt consolidation loan is right for you, it’s important that it is well-structured. A poorly structured loan could have you paying more in interest than you would if you hadn’t consolidated your debt
- Consider what loan term you want to place on your consolidated debt. If you choose a loan term that is too long, you may end up paying more in interest than you would have if you hadn’t consolidated.

To find out if debt consolidation is the right move for you, have a chat with a [Lendi Home Loan Specialist](https://www.lendi.com.au/book-appointment/) for free expert advice. 

## Got a home loan question? Just ask!
We're here to help. Get free expert advice at a time that suits you. Choose a time to chat with a [Home Loan Specialist here](https://www.lendi.com.au/book-appointment/)

*The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.*