What is debt consolidation?

Debt consolidation is the process of combining multiple debts into a single repayment.

Instead of managing several repayments across credit cards, loans or other obligations, some people consider consolidating these into one structured arrangement.

This may simplify repayments, but it does not reduce the amount you owe. It is important to understand the total cost and whether it is suitable for your situation.

Short-term loans can be expensive and may not be suitable for everyone. Borrow only what you need and can afford to repay.

Loans are subject to credit assessment, eligibility criteria and approval.

How debt consolidation works

Debt consolidation generally involves:

• Paying out multiple existing debts
• Replacing them with a single loan or repayment structure
• Making one regular repayment instead of several

The goal is often to make repayments more manageable or easier to track, rather than reducing the total debt.

Common ways to consolidate debt

There are several ways people may approach debt consolidation in Australia:

Personal loans

Some people consider a personal loan to consolidate multiple debts into a single repayment.

A personal loan typically offers:

• A fixed loan amount
• Structured repayments over a defined period
• A clear repayment schedule

This may help simplify finances, but it is important to compare the total cost of the new loan with your existing debts.

Balance transfers (credit cards)

Some credit cards offer balance transfer options, which allow you to move existing balances to a new card.

These may offer temporary lower rates, but conditions and time limits often apply.

Debt agreements or financial hardship arrangements

In more complex situations, people may consider formal arrangements such as:

• Payment plans with creditors
• Hardship assistance
• Debt agreements

These options may have longer-term impacts and should be carefully considered.

When a personal loan may be considered

A personal loan may be considered for debt consolidation if:

• You have multiple debts with different repayment dates
• You want a single, structured repayment
• You understand the total cost of the new loan
• Repayments fit comfortably within your budget

At Fundo, personal loans range from $5,000 to $10,000 and are structured over longer repayment periods compared to short-term credit products.

However, whether this is suitable depends on your individual financial situation and assessment outcomes.

Important considerations before consolidating debt

Before deciding on debt consolidation, consider:

• The total amount you will repay, including fees and interest
• Whether the new repayment is affordable alongside essential expenses
• Whether you are addressing the underlying cause of the debt
• Whether you may take on additional debt after consolidating

Consolidating debt without changing spending habits may lead to further financial pressure.

When debt consolidation may not be suitable

Debt consolidation may not be appropriate if:

• You are already struggling to meet essential living expenses
• You are relying on credit to cover everyday costs
• The new loan would increase your overall financial burden
• You do not have a clear repayment plan

In these situations, other forms of support may be more appropriate.

Alternatives to consider

Before applying for a loan, you may wish to explore:

• Payment arrangements with existing creditors
• Financial hardship assistance programs
• Free financial counselling
• Government or community support

You can contact the National Debt Helpline on 1800 007 007 for free, independent support.

How loan applications are assessed

If you are considering a personal loan for debt consolidation, lenders are required to assess whether the loan is suitable.

This includes reviewing:

• Your income from all sources
• Your regular living expenses
• Existing financial commitments
• Recent banking activity
• Your ability to meet repayments without financial hardship

If a loan appears unsuitable, the application may be declined.

About Fundo

Fundo Loans Pty Ltd holds Australian Credit Licence 491418.

Fundo provides a range of regulated credit products, including:

• Small loans ($500 to $2,000)
• Medium loans ($2,001 to $5,000)
• Personal loans ($5,000 to $10,000)

The most appropriate option depends on your financial situation and what appears manageable based on assessment.