What is a personal loan? Should I consolidate my credit card debt?


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Whether you’re looking to borrow money for buying a car, renovating a house, planning to travel, consolidating your debts, or simply needing extra funds, personal loans let you borrow a specific amount of money that tends to be cheaper on average than any other typical alternatives like credit cards. You’ll usually be able to repay it with interest over a fixed term, which is most of the time between one and seven years.

Read this blog post to understand why, when, how, what etc etc reasons you should use a personal loan to consolidate your credit card debt in Australia.

What type of personal loan are out there to consolidate my credit card debt?

Secured personal loans - let you use an asset you already own, generally a car or equity in a property, as security on your loan.

Pros: They often have a lower interest rate, which could lower your repayments and help you pay your loan down faster.

Cons: Using your car as security can have other conditions around the minimum loan amount, so be sure to read the terms and conditions.

Unsecured personal loans - no need to have an asset – like a car – ‘secured’ against the loan.

Pros: The interest rate could be higher and the amount you can borrow might be lower.

Cons: They can be easier and quicker to set up since the provider won’t need to validate the security.

Fixed interest rates - keep your repayments consistent, for simpler budgeting.

Variable interest rates - offer more flexibility, and your repayments may go up or down if your lender raises or lowers its rates.

When to use a personal loan to consolidate your credit card debt?

  • If you have several debts from credit cards.
  • If you are struggling to make the repayments for the different debts you owe.
  • If you are looking for a cheaper way to get rid of your debts quickly.

That’s why using a personal loan means you’ll only have one payment to make each month, rather than several, and only one lender to deal with. For example, you can repay your lender in monthly instalments, ideally at a lower rate of interest than any other methods including credit card to consolidate your debt.

Why should I consolidate my credit card debt with a personal loan?

There are 5 key reasons to it:

  • Can save you money from potentially lower interest rate and service fees.
  • Repayments that are easier to manage.
  • Can reduce the stress associated with juggling multiple debts.
  • Get you into the habit of making regular payments.
  • A means of providing a clear timeline outlining when you’ll be debt-free

Note: Most banks these days offer personal loans without affecting your credit score.

Consolidating with a personal loan can also help with your budgeting. For example, 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.

Where do I start if I want to consolidate my credit card debt using a personal loan?

Use the following questions as checklists to help you select a personal loan that suits your needs to consolidate your debt:

  • How much do I need/want to borrow?
  • How much can you afford to make repayments?
  • Am I looking for a secured or unsecured loan?
  • Fixed or variable interest?
  • Have I done my research online?
  • Have I looked at the documents requirements for the application?
  • Have I looked at which banks are meeting the all/most of the above criteria? (in this section)

How to compare debt consolidation personal loans in Australia?

Often you make decisions based on:

  • Lower interest rates mean better or interest rate closer to the comparison rate
  • Lowest or no application fees and/or monthly service fees means better
  • Low monthly repayment rate means better
  • Longer loan term to pay off your debt means better

50/50 decision rule: The more you can borrow, the better it is, but it also means more debt, which comes down to your ability to pay the debt and how much you need to borrow.

Don't worry! To make your life easier, we've recently partnered with award winning Australian based NOW FINANCE, Australia's leading go-to personal loan provider to help our members improve their financial wellness. For example, NOW Finance offer various range of low rate fuss-free loans to consolidate your debt including ones that can roll all your debts into one. How cool is that? You can even get a rate quote without impacting your credit file.

Plus, WeMoney eligible members can get a free rate quote and enjoy rates as low as low as 6.95% (6.95% Comparison Rate*) for excellent credit. If you are keen to explore, get your personalised quote now.

Which other consolidation options are available besides personal loans?

Credit card balance transfer- Suppose you don't  want to consolidate your debt with a personal loan, but you are carrying credit card debt that is attracting a high interest rate. In that case, you can transfer the outstanding debt (s) to a new credit card that offers a  0% p.a. interest rate on balance transfers for a certain amount of time. For example, you can combine multiple card debts into one credit card because almost all banks allow up to 80% of the approved limit, so you can get ahead of your debt without paying interest for the promotional period.

However, the 0% p.a. interest free rate will only apply for a set period, such as 24 months. This sets a clear timeframe for when you should have the debt repaid. After this time the standard annual purchase rate usually applies to the remaining debt.

Bottom Story: Should I consolidate my credit card debt using a personal loan or credit card?

There is no guaranteed right or wrong answer here, it depends on your financial situation! For example, it depends on which one works out to be cheaper for what you need/want. But if you are someone with a steady income yet you need a little cash injection say - a decision between do you pull out your credit card or call on a personal loan? Then here are some of the deal-breaker information on personal loans Vs credit cards.

Interest rate

Personal loans: the interest rate is definitely lower.

Credit cards: what is the opposite of low interest rate? BINGO!

Purchase type

Personal loans: It’s more suitable for larger purchases like a car, house renovations, traveling or….for your wedding?

Credit Cards: Smaller purchases by which I mean like clothes, or entertainment.


Personal loans: usually comes with a repayment schedule. For example, debt should be repaid by the end of term.

Credit Cards: minimum repayment each monthly statement.

Debt Amount

Personal loans: Greater limitation on what you can borrow.

Credit Cards: No limitation as it’s an open ended debt-spiral. Therefore, you are most likely to end up in deadly debt traps. If you are curious to find out what I mean by debt traps, listen to our podcast on four common debt traps that people fall into here.


Personal loans: you just need to pay for the application fees and annual fees.

Credit Cards: it’s free of charge for application but likely to have expensive annual fees.

Don't let any outstanding debt control you, instead choose the consolidation option that best serves the financial freedom you want. Thanks for reading this blog!

Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation.

Things you should know

Applications for finance are subject to Now Finance’s lending and approval criteria. Terms and conditions may apply. No establishment, account keeping or early repayment fees will apply to all new personal loans. Charges such as default or enforcement costs may apply if you do not comply with the terms of your loan. Settlement times may vary depending on individual circumstances. Loan repayment terms range between 18 months to 7 years with interest rates ranging from 6.95% p.a. (6.95% p.a. comparison rate*) to 17.95% p.a. (17.95% p.a. comparison rate*).

About Comparison Rates

The Comparison Rate is designed to help you understand the overall cost of the personal loan. It combines the amount of the loan, loan term, repayment frequency, interest rate, fees and charges into a single rate to show the total true cost of the loan. The comparison rates for the Now Finance loans are based on a loan of $30,000 over 5 years.

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