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How to consolidate your debt by refinancing your property

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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.

How much can you save by consolidating debt?

Roll your credit card, car or personal loans into your home loan.

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What is debt consolidation?

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.

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.

How much can you save by refinancing?

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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 today to find out what your options are.

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 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 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

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.

Tags: refinance, interest rate, home loan, debt consolidation, loan term

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Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 35% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. Lendi's board is majority independent and non-executive.
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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