How to consolidate debt effectively and save time and stress

couple consolidating debt

If you spent the end of the financial year getting your finances in order, you may have reviewed your household budget, or set yourself some financial goals for the year. If you’ve been serious about your budgeting and financial planning, you’ll have a clear idea on the debts you have right now, their current interest rates and the term or length of the debt too. Knowledge is power, and now might be the right time to consider how you could make a debt consolidation loan work for you, and your financial goals.

We’ll take a closer look at when debt consolidation can make sense, and how it can save you time, money and stress.

What is debt consolidation?

To put it simply, debt consolidation is the process of simplifying your financial arrangements by rolling multiple debts into a single, lower interest rate loan. Check out our handy article on debt consolidation to better understand the benefits and risks of debt consolidation.

Key benefits include:

  1. May be lower interest rates than your current debt arrangements
  2. May spread your payments over a longer payment term
  3. Your debt consolidation loan payments may be lower than your current multiple debt repayments
  4. Focus on making a single repayment rather than managing cash flow for multiple payments throughout the month
  5. Reduce late payment fees by accidentally missing multiple payments
  6. Can make sense for specific debts such as credit cards and hire purchases that typically have higher interest rates
  7. Reduce stress by focusing on one repayment amount rather than multiple
  8. Reduce time spent managing multiple repayments
  9. Use any surplus income to pay down your loan faster

How to consolidate debt effectively

There are simple steps to take if you want to use debt consolidation as a strategy for your debt management. Read on for our step by step approach to ensure debt consolidation is the right choice for your financial situation and check out these other handy tips to get out of debt sooner.

  1. Add up your debt

Ignore any home loan debt for this exercise. Focus on those smaller, higher interest rate debts for the time being – credit cards, hire purchases, car payments and payday loans. How much do you owe?

  1. What is your average interest rate?

To calculate your average interest rate, you’ll need to consider the different debt balances and different interest rates for each of your debts. Luckily there are free online weighted average interest rates calculators available to help you do the heavy lifting. You’ll want a debt consolidation loan interest rate that can match or better this average interest rate figure.

  1. What repayments can you afford?

Consult your household budget to see what repayments you can afford. It’s no good going to all the effort of consolidating your debt to have unrealistic repayment amounts. Extending the term of your debt consolidation loan can also help make your regular repayment amounts more affordable.

  1. Choosing a debt consolidation loan

If the numbers stack up and you’d like to apply for a debt consolidation loan, make sure you check out admin fees and other terms and conditions such as early repayments. A lender such as Nectar offers fixed interest rates for the lifetime of your loan and no early repayment penalties

debt consolidation calculations

Will consolidating my debt impact my credit score?

Some people believe that applying for a debt consolidation loan might impact on their credit score or credit rating, as it may indicate to credit reporting agencies such as Centrix or Equifax that they are struggling to make loan payments. It is important to understand that missing debt repayments is a key factor in lowering your credit score. If by applying for a debt consolidation loan, you are more likely to make your debt repayments, then this will be better overall for your credit score. You can access more information about credit scores.

Why consolidating debt is a smart move

If you’re struggling with managing your cash flow and remembering when your various debt repayments go out of your accounts, simplifying your debt repayments can be a sensible reason to switch to a debt consolidation loan. has some great advice on the pros and cons of debt consolidation. As always, the key will be to do your research and make sure that any changes to your current debt arrangements actually save you money.

How will debt consolidation save time?

Budgeting should be a regular task, but shouldn’t need to take over your life. If you’re checking your budget more than once a week, then moving to a debt consolidation loan could save you time and free you up for more important things. Some people decide to set up their single debt consolidation loan payment soon after pay day. That ensures you have certainty that you have money in your bank account, and won’t incur late payment or missed payment fees.

It can be time consuming juggling money from one account to another so remove this task from your to do list with simplifying your debts.

How will debt consolidation reduce stress?

We’ve all experienced anxiety around hoping we get paid on time, or what if we don’t have enough money to cover the rent this month. Financial anxiety is common, and being aware of your financial situation and being proactive about it can really help to ease your stress levels. Debt consolidation loans can decrease your interest rates, may decrease your required loan repayment amount and will certainly streamline the number of repayments you’re making. All adding up to reducing your anxiety around your financial situation. What’s more, saving on repayments may mean you have extra cash available to pay down your loan. 

If you’re experiencing financial stress, there is free financial advice help available

How much can you borrow for a debt consolidation loan? 

With Nectar you can borrow unsecured up to $30,000, or as little as $2,000. Use our loan calculator to find out how much you could get. 

Getting started with Nectar

Need a great rate on a debt consolidation loan? We’d love to help with your personal loan requirements. Check out how much you could borrow and learn more about our personal loans. You can get started with Nectar and get a personalised loan quote online which will include your interest rate, maximum borrowing amount and repayment options. Borrow better, faster today!*

*Nectar’s lending criteria and responsible lending checks apply.