Debt Consolidation Explained – Monzi

Debt consolidation may be an option for Aussies struggling with debt. If you have multiple personal loan or credit card repayments each month, you may want to consider consolidation. Monzi is here to explore how it all works and give a little information on our own service.

Please note, certain ideas and products presented in this article may not be offered by Monzi nor the lenders we work with. This article presents only general information. Consider seeking professional financial, taxation, legal or other advice to check how the information and ideas presented on this website relate to your unique circumstances.

What is debt consolidation?

Debt consolidation is the process of rolling multiple debts (personal loans, credit cards etc.) into one payment. As a result, you only have one rate, one set of fees and one repayment schedule with a consolidation loan.

Outside of making your life easier, consolidating your debts may end up saving you money on interest and fees.

If you are struggling with debt and looking for potential relief, consolidation may be worth considering. However, there are potential risks involved with any credit product.

Monzi’s here to get to the bottom of it all; read on.

What are the different debt consolidation options?

There are a number of different ways to make it easier to manage your repayments. Two examples include a personal loan for debt consolidation and a balance transfer credit card.

Both of these options function differently and have distinct pros and cons. Monzi will explore both of these credit products.

How do personal loans for debt consolidation work?

Just like any personal loan, consumers can apply for secured loans or unsecured loans before being assessed. Moreover, lenders assess whether or not the credit product is suitable for the consumer. If the lender approves the application, they make the consumer an offer.

Unlike normal personal loans however, you do not receive the total lump sum into your account as cash. Instead, your debt consolidation loan is used to pay out any outstanding debts.

Finally, once your multiple different debts are settled, the consumer continues to pay down his consolidation loan until it settles. You could be debt-free after you pay your loan out.

Pros & cons of consolidating with a personal loan


  • Easier repayments. Dealing with one lender, one repayment and one set of fees is far easier than dealing with multiple. As a result, you can simplify your life and reduce stress.
  • Save money. If done correctly, consolidating your debt could save you money. If your paying fees and interest on a number of debts, it may be cheaper to pay down one loan and one interest rate.
  • Debt relief. Becoming debt-free may be easier by saving you money on interest and having a single end-date.


  • There is a chance there may be cheaper debt management options available.
  • Personal loans are interest-based. You may not save money if you choose a loan with a higher rate or longer term than your original debts.
  • It may be difficult to secure approval if you have already defaulted on some repayments.

How does a credit card balance transfer work?

A credit card balance transfer, as the term suggests, is when you move the amount you owe on one credit card over to another. This also may be referred to as credit card debt consolidation. Generally, the new interest rate on the balance you transfer may be 0% or another low-rate for a specific period of time. However, compare credit cards do determine what’s available.

You can save money if you manage to repay the amount you transferred within the set period of time. If, however, you cannot, you may end up paying more than your original amount.

Is a balance transfer right for me?

Weigh up the pros and cons of a balance transfer card before deciding whether they are right for you.


  • Lower rate. You may be able to take advantage of low or even no-interest during the promotional period.
  • Better terms. You can transfer your balance to a different account with more attractive fees.
  • Multiple cards. Balances from multiple different cards can be transferred into one.
  • Time frame. You’re given a set period of time to settle your debt before the promotional interest period ends.


  • Once the promotional period ends, your interest rate may be more expensive than your regular cards.
  • Depending on the balance transfer card, you may need to pay a transfer fee of between 1% and 3%.
  • Your credit rating may be adversely affected if you open a new card with a balance exceeding the limit.
  • It may be tempting to spend the new credit at your fingertips.

Weigh up your options before making a decision.

What debt consolidation does Monzi offer?

Technically, Monzi does not offer any consolidation products directly. This is because we are a lender-finder service. If we’re able to match you with a lender, however, they may be able to help you consolidate your debt with a personal loan.

More specifically, the personal loans potentially on offer may be secured or unsecured, depending on the amount you apply for and the lender’s policies.

The loans potentially available through Monzi’s network of lenders are as follows:

Personal loanAmount offeredSecurityTerm
Small loan$300 to $2,000UnsecuredUp to 12 months
Medium loan$2,100 to $4,600Secured13 to 24 months
Large loan$5,000 to $10,000Secured13 to 24 months

Please note however, due to each lender in our network being an individual company, we cannot guarantee the terms of your loan. As such, the actual repayment terms on your loan may vary to what we present above.

Debt consolidation woman smiling wearing low hat at beach

Can I get debt consolidation loans with bad credit?

Yes, debt consolidation bad credit loans are potentially available through Monzi’s network of lenders. These loans function the same as normal personal loans for consolidation, except they are available to Aussies with less-than-impressive credit history.

Bad credit history could potentially be the result of:

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

You may need to consider applying with a bad credit lender if your report is looking a little bruised. Traditional lenders like banks and credit unions may be hesitant to extend credit to consumers with poor credit scores.

What about an unsecured loan?

Yes, you can apply for unsecured debt consolidation loans through Monzi’s panel of lenders. Specifically, any loan valued $2,000 or less cannot be secured by an asset.

If, however, you apply for a loan over $2,001, you may be required to nominate an asset as security. This is because attaching collateral to a loan reduces the risk posed to the lenders. As a result, lenders are often willing to offer larger amounts.

In addition, if you apply for a secured loan with bad credit, you may have a higher chance of success than if you apply for an unsecured loan. This is because your loan is guaranteed by your car, motorbike or other asset.

Finally, remember that bad credit loans often carry higher interest rates to accommodate for the additional risk.

How do I compare debt consolidation loans?

While all personal loans for consolidation have the same intended purpose, different lenders vary in a number of ways. Moreover, it is important you compare different lenders before making a decision.

When considering a personal loan, pay particular attention to the following:

  • Rate. Obviously, you need to find a lower rate than your original debts if you wish to save money.
  • Fees & charges. Lenders may charge upfront and ongoing fees on top of your interest rate.
  • Repayment term.Longer repayment terms result in lower regular payments but more paid in overall interest. The reverse is true for loans with shorter terms.
  • The lender. Confirm the lender you are dealing with is fully licensed and reputable.

Finally, also take into consideration the comparison rate. The advertised comparison rate takes into account the interest plus most of the fees and charges associated with your loan. As such, it may be a truer reflection of the cost of your loan.

What are repayment calculators?

Debt consolidation loan calculators provide a rough guide to what your regular repayments may be.

In short, these calculators are offered by a number of online resources. Moreover, they provide an estimate of your repayments, based on the the amount you wish to borrow, the term and interest rate.

Keep in mind, these calculators may not be exact. Instead, they simply aim to give you information to help you decide whether or not to apply.

Finally, Monzi’s loan slider provides estimates of your weekly, fortnightly or monthly repayments. These are very rough estimates and may not reflect your actual repayments.

Are there any loans with guaranteed approval?

No lender operating legally in Australia should be offering loans with guaranteed approval. This is because, due to Australia’s National Consumer Credit Protection Act 2009.

In short, the key idea behind these responsible lending practices is that lenders only offer consumers credit products that are suitable for their situation.

What exactly do they mean by suitable? A credit product is considered suitable if:

  • it meets your requirements and objectives; and
  • you’re reasonably able to afford your regular repayments.

Therefore, in order to confirm your suitability, lenders must:

  • Make inquiries into your financial situation, as well as your needs and goals.
  • Take reasonable steps to confirm the above information.
  • Make an assessment about whether the loan product is suitable.

As you can see, offering loans with no assessment is illegal. In short, be cautious around any lenders offering guaranteed loans. After all, they may be untrustworthy.

Access a full copy of the Act here.

How do I apply with Monzi?

Monzi’s lender-finder service is easy to use. In fact, you can apply in three easy steps. Let’s show you how it’s done:

Step One

Aussies use the loan slider to pick the amount they wish to apply for. The loan slider provides estimates of repayments. These are simply estimates and may no reflect the actual cost of your loan. Moreover, you can pick your ideal repayment schedule and term.

Click apply now once you are happy with your selection.

Step Two

Next, the system takes you to our submission form. In short, you provide all your information. Don’t stress though – we only ask for the important stuff and there are helpful instructions at every step.

We also ask you to provide your online banking details. Understandably, some of you may be apprehensive. In short, our system asks for your details so we can pull read-only copies of your bank statements.

Monzi then passes this information on to potential lenders. Lenders use this information to get an idea of your current financial situation.

Step Three

Finally, Monzi gets to work once you submit your application. In short, we try to match your application with a potential lender.

If we are successful, we’ll let you know. The lender will then be in touch to complete the assessment. Remember, matching with a lender does not guarantee approval. Lenders conduct their own assessment.

Lenders send through a digital loan agreement if they can make you an offer.

What is in my debt consolidation loan contract?

Lenders offer a loan agreement if they can make you an offer. Moreover, it is essential you read through this contract carefully before approving it.

After all, you are under no obligation to approve the contract offered to you. However, if you approve the contract and then decide to change your mind, things may become a little tricky.

Therefore, read through your contract to confirm you are happy with the following:

  • Amount. Lenders may not always be able to offer the loan you apply for on our site, but they’ll do their best. Therefore, confirm you are happy with the amount on offer.
  • Interest. Do you understand what rate is applied to your loan? This will have a big impact on the total cost of your loan.
  • Fees. Lenders charge upfront and ongoing fees. In addition, confirm you understand what happens if you miss or cancel a repayment.
  • Term. Do you prefer a longer term with lower repayments or a shorter term with less paid in overall interest?

Ultimately, do not sign a contract you do not understand. Get in contact with your lender and they will be able to help you.

How do I make repayments?

Repayments are super easy and generally made through a direct debit set up from your account. In other words, your repayments automatically deduct from your account until your loan settles.

Get in contact with your lender if you cannot afford an upcoming repayment. If you give them enough notice, they may be able to cancel or reschedule your payment for a contractual fee.

In addition, get in contact with your lender if your circumstances change. Moreover, you may be eligible for financial hardship if you cannot afford your repayments.

Consumers need to provide evidence of hardship when they apply. This may include:

  • separation certificate from employer
  • medical certificate
  • bank statements showing reduction in income.

Lenders assess your claim and may offer a repayment plan if you’re approved.

Factor In


Two credit cards
Two credit cards

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 (minimum)

12 months (maximum)


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%. The minimum and maximum loan term is 12 months. 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.

Loan amount

$2,001 - $4,600


13 months (minimum)

24 months (maximum)


48% Annual Percentage Rate (APR)

67.41% Comparison Rate p.a.


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

The Annual Percentage Rate (APR) for Secured Medium Loans is 48%. The Typical Comparison Rate is 67.41% p.a. The minimum loan term is 13 months and the maximum loan term is 24 months. 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 (minimum)

24 months (maximum)


21.24% Annual Percentage Rate (APR)

48% Comparison Rate p.a.


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

The Annual Percentage Rate (APR) for Secured Large Amount Loans is 48%. Maximum Comparison Rate is 48% p.a. The minimum loan term is 13 months and the maximum loan term is 24 months. 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.