What is a debt consolidation home loan?

A debt consolidation home loan allows you to combine some or all of your existing debts into your mortgage.

Many people opt to roll multiple forms of unsecured debt into their mortgage, particularly if their mortgage interest rate is lower than the rates on their other loans.

Your home then becomes security for the loan and you’ll make one monthly repayment to cover your consolidated debt.

Why should I consolidate my debt?

If you have multiple loans and you’re having trouble keeping track of what bills are due or when they’re due, it can help to consolidate your debts into one loan.

Many people have a combination of loans that can become overwhelming to manage.

If you fall behind in your repayments you may find yourself signing a debt agreement. A debt consolidation home loan may be a better option to help you regain control of your financial situation and take steps towards reducing your debt.

Read our real-life case study here.

What debts can I consolidate?

Generally, the debts you want to consolidate into your home loan are high-interest rate unsecured debts such as:

  • Credit cards
  • Personal loans
  • Car loans
  • ATO tax debts
  • Buy now pay later services such as AfterPay.

Do I qualify for a debt consolidation loan?

Generally, banks will look at your repayment history, the amount of unsecured debt, the types of debts etc. when asssessing your application.

They want to see:

  • On time home loan repayments for the past 6 months.
  • On time credit card and personal loan repayments for the past 3 months.
  • No missed repayments with the bank that you are applying with.
  • A strong financial position so that you have the ability to repay the loan.
  • A stable employment history.
  • A good credit history.
  • You need to prove that you will stay in control of your debts in the future.

Specialist lenders can consider missed repayments and a bad credit history, however, the interest rates will be higher.

Was this a one-off event?

Whether or not, missed repayments or a bad credit history was caused by a one-off event is a major assessment criteria of lenders.

For example, lenders are more understanding of missed repayments if it was caused by a one-off event such as divorce, job loss, medical emergency etc.

In contrast, if it wasn’t caused by such an event, lenders will be concerned that you are living beyond your means or are experiencing financial hardship from which you will not recover.

To mitigate this, we use various methods to explain to the lenders that this is a one-off event.

If you have had serious credit impairment, then you must prove that you can afford the new loan amount.

If you don’t meet the above criteria we may still be able to get you approved with a specialist lender.

How much debt can I consolidate?