Consolidate Multiple Loans Into One

Order matters as much as inclusion. If the loan cannot absorb everything, clear the highest-rate debts first, not the smallest balances, unless clearing a small one removes a facility fee that outweighs the interest saved.

Some obligations sit outside a consolidation. Lenders will still count them when they assess you, so they matter even when they cannot be included.

• HECS or HELP debt. It is repaid through the tax system, and lenders count the repayment in serviceability rather than refinancing the balance.
• Child support obligations, which are assessed as a commitment.
• Fines and court-ordered payments, which are generally dealt with through the issuing authority.
• Debts belonging to another person, unless you are a party to them.
• Some tax debts, depending on the lender's appetite and whether the borrowing is consumer or commercial.
• Debts already subject to a formal arrangement, which need advice before anything is refinanced around them.

1. 01

   List everything, including the small ones

   Balance, limit, rate, repayment, due date and lender for every facility. The small forgotten ones are usually the ones with the fee.

2. 02

   Get a payout figure for each

   A payout figure is not the statement balance. It includes accrued interest to the payout date and any discharge or early repayment cost.

3. 03

   Decide what stays

   Occasionally a facility is worth keeping, such as a fixed loan with a punitive break cost and very little term left. That is a calculation, not a preference.

4. 04

   Choose the structure and the term

   Secured or unsecured, single loan or split. This is where the total cost is actually decided.

5. 05

   One application, complete

   Documents assembled once and lodged to the lender on the panel that suits your file, rather than several hopeful applications leaving enquiries behind.

6. 06

   Settle, close and automate

   Every account cleared to zero and closed in writing, one direct debit set the day after pay, and any extra repayment set immediately.

Most of the small disasters in a consolidation happen on settlement day, and nearly all of them are avoidable. The recurring theme is a balance that moved between the quote and the payment.

• Interest accrues up to the payout date, so the figure is always a little higher than the last statement
• A direct debit that fires the day before settlement changes the balance again
• Fixed-rate loans may carry a break cost, which is calculated at the time and not before
• Car and asset finance requires the security interest to be released, which is a separate step
• A card left open with a small residual will attract interest and a fee, and can quietly become a default
• Insurance and subscriptions attached to a closing account need to be moved first

We obtain payout figures directly from each lender, hold them current to the settlement date, and check afterwards that every account has actually closed. That last check is the one most often skipped.

Payout figure

The exact amount required to close a debt on a given date, including interest to that date. It is not the statement balance, and it expires.

Break cost

A charge that can apply when a fixed-rate loan is repaid early. It is calculated at the time, which is why nobody can quote it in advance.

Discharge fee

An administrative fee charged by an outgoing lender for releasing a loan and any security held for it.

Security interest

A registered claim over an asset, such as a financed vehicle. Releasing it is a separate step, and it is the one most often forgotten.

Loan split

A separate portion inside one loan, with its own term. It is how term matching is done in practice, under a single direct debit.

Facility fee

A recurring monthly or annual charge attached to an account. Several small ones can outweigh the interest on a small balance.

Here is the caveat this whole page turns on. Rolling short-term debts into a long mortgage term lowers the monthly repayment and lowers the rate. It can raise the total interest you pay over the full term, because a three-year debt is now being carried for thirty years.

The answer is term matching. Keep each consolidated debt on a term that resembles its original life, using loan splits, so you get the cheaper rate without buying decades of interest.

A multi-debt consolidation is assessed like any other application, with extra attention to whether the transaction genuinely resolves the position.

Assessors are looking for one thing above all: that every listed debt is paid out. A consolidation that clears four of six debts leaves two repayments running alongside the new one, and that file is far more likely to be back within a year.

We can find a way through this.

The loan is the easy part. What determines whether this worked is the eighteen months that follow.

1. 01Confirm in writing that every account is closed, and keep the confirmations.
2. 02Check that no direct debits are still pointing at a closed account.
3. 03Set the single repayment to leave your account the day after pay arrives.
4. 04Keep the extra repayment on each split, and increase it when income allows rather than when you remember.
5. 05Build a modest buffer before increasing discretionary spending.
6. 06Review annually. If a split has crept back out to a long term, put it back.