Build a complete debt inventory before consolidating

A useful consolidation comparison starts with a complete list of what you owe. If a rate, fee, payout figure or remaining term is missing, the new loan can look better simply because the current position has not been fully counted.

List every creditor and product

List credit cards, personal loans, car finance, store cards, buy now pay later purchases, tax debt, overdue bills and money owed elsewhere. Mark anything secured against an asset and any debt that may not be eligible for a conventional consolidation loan.

For each debt, collect the current balance, a dated payout figure, the rate, fees, actual repayment and remaining term. For credit cards and other revolving accounts, include the limit and the end date of any promotional or interest-free period.

Add the date and frequency of every payment. You may find that the pressure comes from the total cost, several deductions landing close together, or both.

You can build the list by hand from statements and online accounts. If you want a quicker view to work from, install WeMoney and connect your accounts to bring your debts and regular expenses together. The app can help you review personalised savings opportunities, although each creditor still needs to provide a current payout figure.

Separate balance from payout amount

The balance you see today may not be enough to close the account. Interest, pending transactions and fees can change the final figure, so use a dated payout amount when working out the size of a possible consolidation loan.

Add up the current repayments and estimate what remains to be repaid. Then compare that position with the proposed loan. Keep any debts left outside the loan in the household total, otherwise the new repayment will look smaller than the amount you will actually pay each month.

Use the latest statement for the rate, fees and contracted repayment, then request a dated payout figure for the amount needed to close the debt. Check your credit report for accounts or limits you may have forgotten. List Afterpay, Zip Pay and other buy now pay later schedules separately because one account can contain several upcoming deductions.

Convert repayments to one frequency

A $90 weekly repayment is about $390 a month, not $360. A $250 fortnightly repayment is about $542 a month. Multiply weekly amounts by 52, or fortnightly amounts by 26, then divide by 12. Using 4 weeks or 2 fortnights will understate the monthly total.

Put the next date and amount for every payment on a calendar. This will show whether the problem is the total repayment burden or several deductions landing together. If timing is the main issue, an existing provider may be able to move a due date without you taking on a new loan.

Consider someone with a $7,000 card at 20.99%, a $9,000 personal loan at 13.5% and $2,000 in buy now pay later schedules. The displayed balances total $18,000, while dated payout figures come to $18,430 after interest and fees. Six deductions add up to $830 a month. Their comparison needs to start with the $18,430 payout total and keep the 6 payment dates visible.

Mark what is missing

Leave missing rates and fees clearly marked rather than guessing them. Contact the provider for the figure before relying on the comparison. A lower repayment is not a saving if part of the current cost has simply been left out.

Mark each debt as paid, closed or deliberately retained. Check for residual balances and open limits, then review the new loan beside the old accounts through at least the first statement cycle. Keep making agreed payments until settlement and closure are confirmed.

Turn the inventory into a settlement plan

Bring the figures together from current statements, online accounts and dated payout letters. Record the legal account holder, balance, payout amount, rate, minimum or contracted repayment, fees, remaining term, credit limit and any security. Label every estimate clearly so it cannot be mistaken for a confirmed amount.

Convert repayments into weekly, fortnightly and monthly equivalents, then add the actual due dates to a 4-week calendar. The totals show the repayment burden, while the calendar shows the timing pressure. A monthly amount may seem affordable even though 3 large debits fall before the same payday.

Use the inventory to compare 3 positions: no change, partial consolidation and full consolidation. For each one, record the combined repayment, estimated total cost, latest finish date and accounts that stay open. Include fees and any debt the lender excludes. Every line in the inventory should appear somewhere in the comparison.

Add a settlement column showing who obtains the payout figure, who sends the money, when the figure expires and what must happen after payment. Continue scheduled repayments until settlement is confirmed. Check the next statement for residual interest or pending transactions, then obtain evidence of closure where needed.

Keep the final inventory with the new loan documents. Review it after 3 months to confirm the old balances stayed at zero and the new loan is reducing as expected. It gives you a record of what changed, which accounts stayed open and why you chose the new arrangement.

Update the inventory whenever a payout figure, quote or account decision changes. Keep one dated version as the settlement record rather than several competing spreadsheets, and retain the statements and letters behind it. This helps prevent the final loan amount being built from a mixture of current and expired figures.

Check the inventory against current statements before relying on the total. Pending interest, annual fees and recent transactions can make a balance different from the figure shown in an app. Mark each amount as a current balance, estimated payout or confirmed payout, and keep the statement date beside it. Refresh older figures before applying. The completed list may also show that some accounts are already affordable, a promotional balance is worth leaving alone or a small debt could be cleared without a new loan.

Frequently asked questions

Include a zero-balance debt if the account is still open. Record the credit limit and decide whether you intend to keep it, because a lender may still consider the liability. Update the inventory before comparing offers and again immediately before settlement. Credit-report balances may be delayed, so they do not replace a dated payout quote.

Turn the inventory into a decision record

Save the current and proposed repayment, estimated total amount repaid, term and number of due dates. Note which debts are deliberately left out and why. You’ll then have a decision record and a checklist for confirming that settlement happened as intended.

If overdue, disputed or collection accounts make the information difficult to gather, a free financial counsellor can help you work through the position before you take on a new loan.

Copy the debts you intend to move into one scenario and leave every other repayment visible. This stops a smaller requested loan being presented as though all the old deductions will disappear. A partial option may also avoid repricing a cheap debt or extending one that is close to being repaid.

Sources

Moneysmart: Get debt under control

Moneysmart: Debt consolidation and refinancing

This article provides general information only. It does not take your personal circumstances into account and is not financial, credit or legal advice. Consider your own situation and seek advice from a suitably qualified professional if you need it.