Consolidation Loans in Australia

For most of us, the experience with debt consolidation is based on the following telephone conversation: "Halooo, my name is Jenny from Melbourne and I am not trying to sell you anything...[meantime there is a distant Indian music in the background] ". We do not like the annoying telemarketing but the product they promote may indeed be needed.

Consolidation loans in Australia often save money because you are paying one bill and you are charged one fee. It is a new method, which reduces payment and also saves time. A lot of debt consolidation companies in Australia claim that they can reduce the repayments by more than 50%. In certain circumstances this is indeed the case but for most situations there is a little difference.

When There Is a Time To Consolidate Loans?

Let us assume the following situation: John has a home loan of $150K. The interest rate for the loan is 7.1%. John has also a car loan of $20K. Here, he is charged an interest of 9%.

Generally, John will pay about $1500 per month to repay his debts. What happens when he consolidates the loans? Well, at the nominal rate of 7.8-8.0% for consolidated debts, John will pay around $1700. Thus, it is better for John to stay with his current lending institutions.

However, should John use a large overdraft on his credit card (at the rate of 12%-14%) the debt consolidation will definitely save money. If you add personal loans into the entire equation then the debt consolidation loans are the only solution.

Therefore, consolidation loans use a single interest rate on all debts. In some cases (like only mortgage) the debt consolidation is undesirable. In other cases (large overdrafts, personal loans etc), debt consolidation is a real life line.

Two Types of Dept Consolidation Loans

Many lenders offer two types of loan consolidation:

  • Loan consolidation into an existing mortgage
  • Loan consolidation into a single personal loan

If you consolidate loans into a mortgage then the overall interest rate is low (currently 7.8-8.0%). For debt consolidation into a single personal loan, the interest is high (about 12%).

Consolidation Loans Lenders

In Australia the market for consolidation loans is very competitive. This indicates strong lending power of the financial institutions and still unshaken economy for people to repay their debts.

GE Money is a giant in personal loans and debt consolidation. However, the fees are a bit on the higher note. The company charges $11.50 per month just for handling the loan. The establishment fee is competitive though ($250).

Debt Relief Australia is a specialist in consolidation loans. Their business is entirely focused into a subject of a credit repair.

Loans Consolidation is another strong debt consolidation business. The company is very flexible and offers loan consolidation into a mortgage or personal loan.

Finally, there are over 3 million internet results for the keyword "consolidation loans". Thus, you should shop around as the competition in this market is high.