How to use a debt consolidation loan to your advantage in 2022 - Mozo.com.au

Looking to make life simpler in 2022? Aren’t we all! 

If you’re still carrying multiple personal debts from 2021, like a hefty credit card balance, a lingering personal loan or weighty car loan, debt consolidation might work to your advantage this year.   

Not only can debt consolidation loans make paying off your multiple debts a whole lot easier to manage, they can also save you money too! 

So if you’ve had enough of your current repayment situation, check out the benefits of consolidating your debt in 2022 … 

Sick of wasting time and energy on managing your numerous repayment plans? One major benefit of rolling your multiple personal debts into a debt consolidation loan is that you only need to worry about one regular repayment, rather than manage and keep track of a few. 

This way you can align your loan repayment with when you get paid: weekly, fortnightly or monthly (depending on what schedule the lender offers). Similarly, in some cases you may be able to set up an automatic payment whereby on a selected day of each week, fortnight or month your repayment is automatically made from your bank account … simply set and forget. Talk about minimal effort! 

Another draw card of a debt consolidation loan is that you can actually save on interest by combining your debts. Generally speaking, when you take out this type of loan the interest rate is lower than at least one of your debt types (such as a credit card which may have a higher rate than a personal or car loan). 

Take this example: 

Mario has a $20,000 car loan at 9% interest rate, $5,000 of credit card debt at 22% interest rate and $2,000 store card debt at 18% interest rate. If he were to keep his repayments separate, he’d pay a combined amount of $899 per month. Over three years, this would end up costing him a total of $5,373 in interest. 

On the other hand, if Mario took out a $27,000 debt consolidation loan (his combined debts) with an interest rate of 8.00% his monthly repayment would drop to $846. This means, Mario would pay $3,459 in interest over the same three-year period and end up saving $1,914 in interest payments. 

Fees aren’t fun. But the good news is, debt consolidation can help you dodge them. 

When you have multiple personal debts, chances are you are being charged a range of fees on each product. For example, you may be forking out an annual fee on your credit card, monthly keeping fees on your loan or even additional costs for making extra repayments. 

So when it comes to your debt consolidation loan, use the opportunity to say goodbye to as many fees as you can and reduce what you pay on the loan itself. That’s not to say that you won’t pay any fees at all, but keep an eye out for costs like upfront establishment fees, ongoing service charges and early repayment costs. The fewer you pay, the better. 

If your multiple debts feel like a never ending cycle of repayments, a debt consolidation loan can allow you to pay off what you owe sooner. 

As mentioned, with this type of loan you could save on the amount of interest you pay. This means, by paying less interest you can free up more cash to go towards paying off your loan amount. 

On that note, an important feature to look for when choosing a debt consolidation loan is the ability to make free extra repayments. This allows you to make additional contributions towards your debt on top of your regular repayments. Also try and choose a loan that doesn’t charge an early repayment penalty when you pay off your loan in full ahead of time. That way once your debt is cleared, you simply walk away (at no extra cost to you). 

If you’re looking for some more ways to clear your debt, check out these 6 top tricks to ditching debt in 2022. Or if you want to start comparing debt consolidation loans right now, take a look at the options below or head over to our personal loan hub for more!
Excellent Credit
OurMoneyMarket offer competitive low rates for borrowers with excellent credit on loans up to $75,000, plus free extra repayments and fee-free redraw facility. Winner of Mozo’s Experts Choice Unsecured Personal Loan 2021 award^.
Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 6.25% would cost $35,258.67 including fees.
Read our Mozo Review to learn more about the OurMoneyMarket Low Rate Personal Loan
Fixed
Borrow up to $50,000 unsecured. Perfect if you earn more than $22,100 p.a. and have good to excellent credit. Back to back winner of Mozo’s Experts Choice Unsecured Personal Loan Award, 2021 & 2022^.
Repayment terms from 2 years to 7 years. Representative example: a 5 year $30,000 loan at 6.75% would cost $35,430.23 including fees.
Read our Mozo Review to learn more about the NOW Finance Unsecured Personal Loan
Fixed, Unsecured
Handypay offers flexible home improvement loans for Excellent Credit or better. Handypay is a specialist home improvement plan provider and offers loans up to $75,000.
Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 6.99% would cost $35,883.67 including fees.
Read our Mozo Review to learn more about the Handypay Home Improvement Loan
Fixed
Fast, easy and 100% online, this is a low cost loan with no ongoing fees or extra repayment penalties. It’s perfect for savvy borrowers with great credit. If you’re over 18 and earn above $30,000, you could qualify (other eligibility criteria may apply).
Repayment terms from 3 years to 5 years. Representative example: a 5 year $30,000 loan at 5.35% would cost $34,832.61 including fees.
Read our Mozo Review to learn more about the Harmoney Unsecured Personal Loan
Fixed
Wisr offers personal loans for any worthwhile purpose, tailored to your credit score to ensure you’re getting a fair deal. Plus, no ongoing or early exit fees. Loans from $5,000 to $64,000. Terms of either 3, 5 or 7 years. $595 establishment fee. Eligibility criteria applies.
Repayment terms from 3 years to 5 years. Representative example: a 5 year $30,000 loan at 7.45% would cost $36,620.55 including fees.
Read our Mozo Review to learn more about the Wisr Unsecured Personal Loan
* WARNING: The Comparison Rate combines the lender’s interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.
^See information about the Mozo Experts Choice Personal Loan Awards
Mozo provides general product information. We don’t consider your personal objectives, financial situation or needs and we aren’t recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don’t cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.
Polly Fleeting is a personal finance writer here at Mozo, specialising in loans and credit cards. Her work is aimed at helping people find ways to make smart product choices, reduce debt and get more for their hard-earned dollars. Polly has a degree in Journalism from the University of Technology, Sydney. She is also ASIC RG146 (Tier 2) certified for general advice.
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