How does debt consolidation work?
If you have three different credit cards with debts of, for example, $3,000, $4,000 and $7,500, you’re likely to also have three different interest rates and to be making three different repayments at different times each month.
This can feel overwhelming and complicate managing your cash flow. The interest rate on one card may be significantly higher than the others – and if the highest rate is on the card with the $7,500 debt, you could be paying plenty each month just to cover the interest, let alone paying down the debt itself.
One option you have to consolidate your debts is to take out a single personal loan to pay off each credit card and any outstanding interest. With a personal loan you’ll have just one repayment to make every week, fortnight or month over a set term – you can usually choose your own frequency of repayments.
And if the interest rate on the personal loan is lower than your credit card rates – and they often can be – this can help you get ahead in reducing your overall debt.
You can use a personal loan repayment calculator to work out exactly what your repayments will be.
Why would you consolidate?
To summarise, the key advantages of consolidating your debt are:
- A potentially better (lower) interest rate
- Repayments that are easier to manage
- A means of providing a clear timeline outlining when you’ll be debt-free
Taking out a personal loan can also help with your budgeting. Instead of just having to make minimum repayments as you do on credit cards, you’ll have to make set repayments that cover both the loan amount and interest, which you know will end at a certain date.
You can choose to lock in your interest rate with a Fixed Rate Personal Loan, or enjoy the flexibility of making extra repayments and clearing your debt sooner with a Variable Rate Personal Loan.
Talk to us
If you would like to speak with someone before taking any steps to consolidate or refinance your debt, we’re here to help. Our personal loan experts are available to call any day during the week between 8am and 8pm Sydney/Melbourne time on 13 14 31. You can also visit your nearest CBA branch to speak with someone in person.
If the unexpected happens and you’re behind in paying what you owe, look for assistance where possible. The Department of Human Services can help you find out what services are available for you.
If you’re a CommBank customer, you can call us on 13 3095 or request financial assistance in NetBank if you are behind, or think you are likely to fall behind, in paying what you owe. Consider our support options – including our Financial Assistance Solutions teams who are here to support you in getting back on your feet in times of financial difficulty. You can also email at any time to firstname.lastname@example.org