Consolidation Loans Guide – A to Z

Consolidation loans may be an option worth considering if you find yourself struggling with multiple different debts. If you aren’t sure what they are, don’t stress. We’ll explain exactly what consolidation loans are.

Monzi is a lender-finding service. We do not offer financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented on this website relate to your unique circumstances.

What are consolidation loans?

Consolidation loans are loans that combine a number of existing debts into one payment. Moreover, you can reduce the stress of dealing with several different rates, fees and repayment dates.

Loans for debt consolidation work by paying out your existing debts. Then, the consumer only has one lender to repay.

Many consumers consider consolidation loans because they can simplify your life. There are, however, additional benefits, including:

  • potentially saving on rates and fees
  • having only one repayment cycle to keep track of
  • potentially improve your credit history.

What are bad credit debt consolidation loans?

These debt consolidation loans work just like any loans for consolidation, except they are available to consumers with bad credit history.

A bad credit score can be the result of a number of factors, including:

  • missed or late payments
  • defaults
  • court orders
  • debt agreements.

A poor credit record may make approval from traditional lenders difficult. Traditional lenders may include credit providers such as banks or credit unions. Therefore, alternative options may be worth considering.

What kind of debts can I consolidate?

There is a number of different types of debt you can consider consolidating. The most common types, however, are:

Personal loansPayday loans
Credit cardsCar loans

The great thing about these loans is you can consolidate multiple different loan types; it doesn’t matter if you have two payday loans and a credit card, or two credit cards and a car loan.

Is it possible to get unsecured debt consolidation loans?

Yes, it is possible to get an unsecured loan to consolidate multiple debts. Therefore, lenders will base their assessment on your income, expenses and past repayment history.

Obviously, unsecured loans are not backed by any sort of asset belonging to the borrower. Moreover, lenders have no asset to repossess in the event of a failed loan. Unsecured loans, as a result, are seen to be riskier for lenders than secured personal loans.

Due to this added risk, lenders are likely to scrutinise your application more than if it were a secured loan. Approval may become more difficult, especially if you have a poor credit score or bad repayment history.

How do personal loans for debt consolidation work?

Personal loans for debt consolidation work the same as any form of consolidation. In other words, you use this new loan to settle existing debts.

Once your existing debts are settled, you move forward with making one regular repayment on your new personal loan.

Finally, be aware that personal loans can come as both secured and unsecured. To be eligible for a secured loan, you will need to be the owner of one of the following assets:

  • car
  • caravan
  • motorbike
  • boat.

Do consolidation loans hurt your credit score?

Consolidation loans may actually improve your credit score if you handle them correctly.

After all, the main premise behind debt consolidation is settling on-going consumer debts. Settling debts is seen as good credit behaviour. As long as you consistently make repayments towards your new consolidation loan in time, your score may be improved.

Obviously, however, poorly handled debt consolidation will negatively impact your credit score. Therefore, it is important you always confirm your new loan will be cheaper than your existing debts. If not, your credit score may be knocked even further, or you may even enter into a debt spiral.

Is it a good idea to get a consolidation loan?

It may be a good idea to get a consolidation loan if you are sure it will save you money and simplify your life. On the other hand, it is likely not a good idea to get a loan if the reverse is true.

More specifically, consider the following before you apply:

  • Will you save? Obviously, the affordability of consolidation is a factor worth considering. Confirm the new loan you take out is cheaper than paying off existing debts. Otherwise, you run the risk of falling deeper into debt.
  • What will it cost me? Confirm whether your existing debts charge additional fees for early repayment or not. If so, you will need to factor these charges into your calculations.
  • Who is my new lender? It is always a good idea to confirm your consolidation lender is fully licenced by ASIC and legally able to operate in Australia.

Pros and cons of consolidation

As we mentioned, consolidating your debts may be a great option in certain situations; however, they may not be for everyone. So, to give you a better idea, here are a few major pros and cons of consolidation.


  • Simplify your life by having one, simple repayment to remember each week.
  • Potentially save you money by reducing overall payments and costs.
  • No longer being pestered by debt collectors.


  • Failure to make repayments may increase your debt.
  • May need to pay fees for settling your existing debts early.

Debt consolidation loans for Centrelink customers

Swimming in debt whilst being on Centrelink can rapidly send your financial worries through the roof. A personal loan for consolidation, in some situations, may ease this stress by simplifying repayments and potentially saving you money.

If you do receive Government benefits, lenders may be willing to consider your application. You will, however, need to be earning a sufficient income.

Ultimately, you should consider all other options before taking out new credit if you are struggling with debt while receiving benefits. Specifically, consider seeking professional financial advice.

You can get in touch with a free financial counsellor by calling The National Debt Helpline on 1800 007 007. Keep in mind, the line is only open from 9.30 am to 4.30 pm Monday to Friday.

Where can I find guaranteed debt consolidation loans for bad credit?

You shouldn’t be able to find guaranteed loans for debt consolidation anywhere. Anywhere legal, that is.

All credit providers operating in Australia must take steps to ensure they are lending money responsibly. More specifically, these obligations have been outlined by The Government in chapter 3 of the National Consumer Credit Protection Act 2009.

In short, this act aims to protect Australian consumers from entering into unsuitable loan products. Therefore, all credit providers are expected to:

  • inquire into the applicant’s financial situation, requirements and objectives;
  • take steps to confirm the borrower’s financial situation for themselves; and
  • make an assessment as to whether or not the loan product is suitable for the consumer.

To cut a long story short, offering any sort of loan with guaranteed approval is illegal. Therefore, avoid any credit provider that offers this. There is a chance they may be a scam.

Consolidation loans life buoy floating on water

Can Monzi get me a loan to consolidate my debt?

Monzi cannot offer you a consolidation loan ourselves, however, we may know a few lenders that can. See, Monzi is a lender-finder service, and a good one at that!

What we do is try to make life easier for everyday Aussies. Specifically, we try to simplify the way consumers access lenders online. Instead of applying with multiple different lenders, you can apply once with Monzi and let the lenders come to you.

If you match with a lender, they’ll first assess your application and send through a contract if you’re approved. Monzi works with lenders potentially able to offer personal loans for debt consolidation up to $10,000.

How do I combine all my debts with Monzi?

As we mentioned, you may be eligible to consolidate your debts with one of the lenders from within our network. While we can’t guarantee you will be approved, we do work with lenders that are willing to consider applicants with not-so-sparkly credit history.

To give you a clearer idea of how to apply, we’ll run you through the process step-by-step.

Step one

Consumers must first head to our website to begin. From there, select the amount of money you wish to borrow. Remember to calculate how much money you need to consolidate your debts successfully. Once you make a selection, click apply now.

The next screen will show a number of different loan options, from bills to travel expenses. If you are looking to consolidate, make sure you select the loan consolidation option.

Step two

The application now takes you to the submission form. Here we need a few pieces of information from you, so we can compile your application. Don’t stress though, we only ask for the important stuff, so applying should be pretty quick.

Step three

Once you successfully submit your application, you can sit back and relax. If we pair you with a lender from our network, they will first assess your application and get in touch if they can make you an offer.

Remember to always read through your contract thoroughly before approving anything. In particular, make sure you are happy with the loan amount, repayment terms and any additional fees and charges.

Am I eligible to apply with Monzi?

You are eligible to apply with Monzi if you meet the following criteria:

  • at least 18 years old;
  • hold an Australian Citizenship or Permanent Residency;
  • have a personal contact number and email address; and
  • have an online banking account with at least 90 days of recent banking history.

When will I receive an outcome?

The beauty of our 100% online business model is we can help heaps of Aussies – and fast!

If you apply with Monzi during normal business hours, you may receive an outcome within 60 minutes. If you’re paired with a lender, outcome times may vary.

Despite this, there are a few things you can do to put yourself in the best position for a quick outcome:

  • Aim to provide all relevant information when you first apply. If you forget to include an important piece of information, the lender may need to pause assessing your application.
  • Keep your phone and emails handy closeby. The faster you respond to questions and requests, the quicker the lender is able to provide an outcome.

Debt consolidation loans for bad credit online decision

Monzi’s lender-finder service is 100% online. As you can tell, we love technology as much as you do. Therefore, applying on our site is super easy.

Our system is often able to digitally access a lot of the information we need. For example, lenders use the last 90 days of your bank statements to help them make a decision whether or not to offer you money.

In the past, consumers would need to provide physical copies of their bank statements. These days, it’s all digital. In fact, all you need to remember is your normal online banking login. From there, our system digitally pulls the information we need.

If it’s security you’re worried about – don’t be. Monzi is protected by both Comodo and McAfee, two giants of internet security. Therefore, your details and information are always kept safe and secure.

How do I make repayments?

Many people consolidate their loans because they struggle to keep up with multiple repayment cycles. Well, once your debts are rolled into one payment, things should become a little easier.

Lenders generally set up a direct debit from your account. Therefore, your repayments are automatically deducted on a regular cycle. Having enough money in your account each cycle is the only thing you need to remember. Finally, the direct debit stops once your debts have been settled.

I can’t afford a repayment

If you are concerned you cannot afford an upcoming repayment, get in contact with your lender as soon as you can. If you provide enough notice, lenders may be able to cancel or reschedule your payment according to your contract.

Finally, let your lender know ASAP if you have a major change in circumstance. For example, if you lose your job your ability to afford your repayments is affected. Let your lender know of your change in circumstance and you may be offered a hardship payment plan.

In general, always be honest and upfront with your lender. Otherwise, you may find yourself struggling with debt once again.

Need help?

Do you have more questions? you may be able to find the answers in our FAQs section.

Alternatively, you can reach out to our team directly at; we’re happy to walk you through any and all questions you may have.

Just remember, our team needs their sleep too! So, if you email us outside of normal hours, there may be a delay. Don’t worry though – we’ll reply ASAP! Also, we can’t really talk on behalf of other lenders. So if you have a query about a lender, get in touch with them. They will be able to help you!

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You won't use a penny to apply for our lender-finding service, but here's some costs you could expect from a lender

Loan amount

$300 - $2,000


12 months


20% upfront establishment fee

+ 4% monthly fee


Loan Amount of $1,000 over 6 months repayable weekly (25 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $240 (fees based on 4% per month over 25 weeks) = $1,440 total repayable in 25 weekly installments of $57.60.

Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR) %. The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The maximum comparison rate on loans between $300 and $2000 is 199.43%. This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate

Loan amount

$2,001 - $4,600


13 months

24 months


48% annual percantage rate

67.41% comparison rate p.a.


Loan Amount of $3,000 over 18 months repayable weekly (78 weekly repayments). $3,000 (Principle Amount) + $400 (Establishment Fee) + $1,379.06 (reducing interest) = $4,779.06 total repayable over 18 months with weekly installments of $61.27.

The Interest Rate for Secured Medium Loans is 48%. The Typical Comparison Rate is 67.41% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.

Loan amount

$5,000 - $10,000


13 months

24 months


21.24% annual percantage rate

48% comparison rate p.a.


Loan Amount of $10,000 over 24 months repayable weekly (104 weekly repayments). $10,000 (Principle Amount) + $5,577.12 (Interest) = $15,577.12 total repayable over 24 months with weekly installments of $149.78.

The Interest Rate for Secured Large Amount Loans is 48%. Maximum Comparison Rate is 48% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.