Is Debt Consolidation a good idea?

June 19th 2020 | Categories: Debt Management |

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What is Debt Consolidation?

The process of taking a new single loan to pay off multiple liabilities is termed as debt consolidation. It helps to combine multiple debts into one larger loan.

Debt consolidation does not erase or reduce debt obligations. It simply places them with a single lender rather than various lenders. For instance, you may have multiple personal loans and a credit card debt that can all be consolidated into a single loan. Debt consolidation loans generally have a lower interest rate than a lot of credit cards and personal loans making the repayments more affordable. However, in many cases, the term of the loan could be extended for a longer period than your existing loans.


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Benefits of Debt Consolidation

Debt consolidation could be advantageous to you if you are overwhelmed by juggling multiple repayments with different lenders. It not only rolls all the debts in one but may also help in reducing monthly payments. The benefits of debt consolidation include:




You may be interested in our article 5 tips to prevent debt stress getting you down


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The Downside of Debt Consolidation

The perks of consolidating debt may sound too good to pass especially when you consider lower monthly repayments. But there are factors to consider before you decide to consolidate your debts.




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Source: Mozo




For many, debt consolidation may become tempting when multiple payments become too expensive or overwhelming. It can be beneficial if you have a plan to utilize the low-interest rate to pay your loan off in a shorter amount of time than your original loan terms. Keep in mind that you could end up paying more if you agree to a longer-term long.

Before consolidating you should consider other options such as:


You may also be interested in our article “spotlight on personal loans and how to repay your loan faster”.


Debt consolidation is an effective means to streamline your finances and bill payments. It works well by reducing multiple payments to one lump-sum payment, possibly at a lower interest rate, and may help to reduce financial stress. However, it is necessary to consider the loan costs, the credibility of the loan provider, and security of your assets and long-term life repayment amount before consolidating all your loans into one.


Speak to an adviser today to see how we can help you take control of your finances.

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What you need to know

This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.