What should you look for in a reputable debt consolidation lender?

Five things: a credit licence you can verify, a comparison rate shown next to any advertised rate, fees you can see before you apply, membership of the Australian Financial Complaints Authority, and no promises about approval. Every reputable lender in Australia can show you all five, so if one of them is missing, pause before going further.

Researching a consolidation loan means handing your details, and eventually your signature, to a company you probably hadn't heard of last week. For many people this is the uncomfortable part, because the loans start to look the same, and it's hard to know who's actually behind the website. The good news is that the checks are quick, free and don't require you to be a finance person.

Are they licensed to lend?

Start here, because everything else hangs off it. Lending to consumers in Australia requires an Australian credit licence, and every licensee is searchable on ASIC's professional registers. Search the company's name or licence number (reputable lenders print it in their website footer). Comparison and matching services appear there too, either with their own licence or as a "credit representative" of a licensee.

It takes about two minutes, and it's the strongest check there is: if a company offering credit isn't on the register, don't give them your details.

Do they show a comparison rate?

They have to, because wherever a rate is advertised for this kind of loan, the law requires a "comparison rate" alongside it, which folds most fees into a single percentage. A reputable lender's website makes it easy to find. If you can't spot it on the page, the loan's key facts document lists it, so find it before you compare.

While you're there, read the headline rate carefully. "From" rates are generally offered to applicants with the strongest credit profiles, so the rate you're offered may be higher, which is why comparing loans on their comparison rates and your own numbers beats comparing them on their ads. There's a full walkthrough in how to compare debt consolidation loans.

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Are the fees visible before you apply?

You shouldn't have to apply to find out what a loan costs. Establishment fees, monthly account fees and early-exit fees should all be listed on the lender's site or in the loan's key facts before any application. Be careful with any request for an upfront payment just to "arrange" or "find" you a loan (a lender charges fees inside the loan, not before it), and with any fee the website mentions but won't put a number on.

What happens if something goes wrong?

A reputable lender has a visible answer. Licensed lenders must belong to the Australian Financial Complaints Authority (the free external service that handles disputes when you and a lender can't resolve one directly), and you can search their membership too. It's also worth finding the lender's hardship page before you borrow, not after: it tells you how they treat borrowers whose circumstances change, which is worth knowing on a loan you may hold for years.

And if you're declined, that's one lender's assessment of your position at the time you applied, and it doesn't carry to every other lender, though each full application is recorded on your credit file, so compare before re-applying rather than applying again straight away. If your credit file is the reason, consolidating loans with bad credit covers the realistic options.

What about "guaranteed approval"?

No legitimate lender guarantees approval. Lenders are required to assess your application and can only lend if the loan isn't unsuitable for you, so a guarantee isn't something a licensed lender can honestly offer. The same goes for "no credit check" loans, because checking is part of lending responsibly, and we've covered why no-credit-check claims are risky. Wherever you see wording like this, go back to the licence check before anything else.

What about comparison sites and matching services?

The websites between you and the lenders need the same five checks, plus three of their own. First, is the company clear about what it is, whether that's a lender, a broker, a comparison site or a matching service? A reputable one says so plainly. Second, is it clear about what happens to your credit file when you use it, because a browsing-and-matching step shouldn't require a full credit application. Third, is it clear how the service makes money? Reputable comparison and matching services say so on their site.

That's also exactly what WeMoney is, so: WeMoney isn't a lender. It's a money management app whose matching service (BrightMatch) shows you lenders from our panel whose criteria you may fit, and you may qualify subject to the lender's own assessment. Lenders on our panel pay WeMoney a fee if you take up a loan, and you never pay WeMoney for matching.

Pro tip: BrightMatch uses soft checks only, so there's no damage to your credit file and no hard checks a lender can see.

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If the research keeps ending in "none of these work"

That usually means a new loan isn't the right option for where things are at, rather than that you haven't found the right lender yet. Financial counsellors are free, independent and confidential, and the National Debt Helpline on 1800 007 007 will talk through your options without selling you anything, however messy things feel.

Key points

• Check any lender or loan website on ASIC's professional registers before handing over your details, because licensed lenders and their representatives are all searchable, free.
• A comparison rate must be shown wherever a rate is advertised for this kind of loan, and "from" rates generally go to the strongest applicants, so compare loans on comparison rates and your own numbers.
• Fees should be visible before you apply, and no reputable lender asks for an upfront payment to arrange a loan.
• Licensed lenders belong to AFCA, so you have a free complaints route if something goes wrong.
• No legitimate lender guarantees approval, and a decline reflects one lender's assessment at the time, not every lender's.

This article is general information only. It doesn't take your circumstances into account.

Sources

• ASIC: Professional registers
• Moneysmart: Personal loans
• Moneysmart: Consolidating and refinancing debts
• Australian Financial Complaints Authority
• National Debt Helpline