Debt Consolidation Personal Loans

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A debt consolidation personal loan is a way of simplifying your debts and repayments while reducing your interest costs.

You can consolidate most debts into a single loan amount, regardless of how long you’ve had it or how it has impacted your credit score. In fact, personal loans for debt consolidation can improve your credit score by making sure you never miss another payment.

What is a debt consolidation personal loan?

Debt consolidation personal loans are a type of personal finance used in New Zealand to reduce and eliminate personal debt.

Debt consolidation loans take many separate debts like credit cards or other loans and merge them into a single loan that should be cheaper than your existing total repayments.

This simplifies your debt:

One amount
One set of fees
One interest rate
One loan term
One regular repayment

A personal loan for debt consolidation should ideally have a lower total interest rate and fee charges than your other debts so that consolidating your debts is beneficial for you beyond just having a single repayment date.

You can qualify for a debt consolidation personal loan in New Zealand if you are:

18 years or over
Currently employed with a sufficiently stable income to repay the loan amount
A permanent NZ resident or hold a work permit or visa allowing you to reside in New Zealand

If you meet the standard qualifying criteria for a debt consolidation personal loan, you can calculate how much you can borrow and compare lenders to find the best loan offers available in New Zealand before applying for a loan.

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Why get a debt consolidation loan?

Using a personal loan for debt consolidation could make it easier to manage and get out of your existing debt, but you’ll want to make sure you really benefit from a new loan before committing to it. Here are a few signs that you’d benefit from consolidating your debt:

1. Consolidating your debt will make it easier to manage

If you’ve got multiple debts, credit cards, and amounts being charged interest, it can be easy to start missing payments and racking up fees. A debt consolidation loan should make your payments easier to manage and understand, and offer you the ability to repay your loan sooner if you want to.

2. Consolidating your debt will reduce your fees and loan charges

Outdated credit cards and regretful loans can have high fees, so transferring those amounts to a cheaper loan might make sense. But some of those loans may also have fees to repay the amount early - pay particular attention to early repayment or break fees, and any late repayment fees, establishment or application fees on your new loan.

3. Consolidating your debt will get rid of high-interest debts

While it’s not always as common with loans, credit cards can have crushing interest rates, particularly when withdrawing cash on your card. If you have multiple cards charging high rates, you might want to check if consolidating that debt would save on interest charges that are keeping you in a cycle of debt.

How to use a debt consolidation loan

Debt is usually expensive, especially high-interest rate credit cards and store cards, so paying it off as quickly as you can is one of the easiest ways to avoid financial stress:

Calculate your extra savings. Once you’ve reduced the amount you’re paying on your loan, figure out how much extra you’ll have to put aside and incorporate this into your budget to start reducing your debt further.
Start reducing your total debt. If you choose a debt consolidation loan with an option for extra repayments, you can start reducing your debt down sooner without the stress of missing payments.

Before applying for a debt consolidation personal loan, you should compare fees, interest rates and loan features to make sure that it will save you money and provide the features you need to get out of debt.

Check if you qualify