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Debt consolidation loans

Bring credit cards, store cards and other personal loans together into one loan with one repayment. Apply online and we aim to give you an initial decision quickly, often within an hour during business hours.

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The short answer

What is a debt consolidation loan and how does it work?

A debt consolidation loan is a personal loan that pays off several existing debts, such as credit cards, store cards and other personal loans, so you have one loan, one lender and one regular repayment. Debt consolidation loans in New Zealand run over a set term, and whether one costs less overall depends on the rate, fees and term.

Last updated

Why people consolidate

What changes when you combine your debts.

Consolidation changes how your debt is structured, not how much you owe.

One repayment

One loan, one lender and one repayment date in place of several balances, statements and due dates.

A set end date

A fixed term gives a known date when the loan is fully repaid, unlike a card balance.

Costs in writing

The rate, fees and total amount payable are in your loan documents before you sign.

The basics

What is debt consolidation?

A man at a kitchen bench writing a list of his debts in a notebook, with opened envelopes and a calculator beside him

Debt consolidation means replacing several debts with one new loan. A debt consolidation loan is one of the personal loans we arrange: the new loan pays off the balances you choose, and from then on you make one repayment, on one date, to one lender.

It does not make the debt smaller: what you owe carries across, sometimes with fees added. What changes is the structure: one rate, one term and an end date.

Which debts can be included depends on the lender’s criteria. Commonly combined debts include:

  • Credit card balances
  • Store cards and buy now, pay later balances
  • Existing personal loans
  • Other unsecured debts, such as an overdraft

Weighing it up

Is debt consolidation a good idea?

Debt consolidation can be a good idea when it makes your debt simpler and the new loan, including fees, costs no more in total than keeping your current debts. That depends on your balances, your current rates and the term.

It is less likely to help when the new term is much longer than your debts would take to clear, or when spending carries on using the cleared cards. More common loan questions are in our FAQs.

It tends to suit people who:

  • Have regular income from work and can afford the new repayment
  • Are juggling several due dates and want one repayment to track
  • Want a fixed end date in place of card balances that run on at minimum repayments

The trade-offs

What is the downside of getting a consolidation loan?

The main downside is that a longer term can mean more interest in total, even when each repayment is smaller.

The other trade-offs to weigh before you sign:

  • Fees. Establishment fees, and any early repayment costs on current debts, are part of the real cost. They appear in your loan disclosure before you commit.
  • Cleared cards stay open. Paying a card off does not close it, so new spending leaves you with the new loan and the old debt.
  • Security. Some consolidation loans are secured over a vehicle. If repayments stop, the lender may be able to repossess it.
  • A credit enquiry. A lender’s credit check is usually recorded on your credit file, as it is with most credit applications.

Your credit file

Do consolidation loans hurt your credit score?

A consolidation loan affects your credit file in two ways: the application adds a credit enquiry, and the new loan’s repayment history is recorded from then on. Neither sets your score on its own; the effect depends on everything else in your file.

Credit reporters in New Zealand can record whether repayments are made on time, so missed repayments can count against you, and on-time repayments build a record over the life of the loan.

Lenders usually run a credit check, with your consent, once your application goes to them.

Repayments

How much is the payment on a $50,000 consolidation loan?

At an example rate of 12% p.a. over 5 years (60 monthly payments), a $50,000 consolidation loan works out to about $1,112.23 a month, excluding fees. Your actual rate is set by the lender, and the repayment also depends on the term, any fees added to the loan and how often you pay.

The same amount over a shorter term means higher repayments and less interest in total; a longer term means the reverse.

You can estimate your consolidated repayment with our calculator. Calculator results are estimates only; the lender confirms your actual rate, fees and repayments. Approval for any amount depends on your income, your commitments and the lender’s criteria.

To get a useful estimate:

  1. 01Add up the payout figure for each debt.
  2. 02Enter the total and the frequency that matches your pay.
  3. 03Try a shorter and a longer term.
  4. 04Compare the result with what you pay across all your debts today.

Other options

How do you get rid of $30,000 in debt?

Getting rid of $30,000 in debt starts with a full list of what you owe, then a plan you can keep up: paying debts down one at a time, combining them into one loan, or getting free budgeting help. Which fits depends on your income, your costs and the rates on each debt.

Paying down one at a time means keeping up every minimum and putting anything extra towards one debt, often the highest rate, until it is cleared. Consolidation swaps the list for one loan with a set term.

If repayments are already hard to meet, a new loan may not be the answer. MoneyTalks, run by FinCap, offers free support and can connect you with a financial mentor: 0800 345 123, free text 4029 or help@moneytalks.co.nz.

We do not arrange loans for applicants whose main income is a benefit, or who are not currently working. If that is your situation, MoneyTalks is the place to start.

How to apply

Applying for a debt consolidation loan

When you are ready, apply for a debt consolidation loan online, or call 0800 995 014 if you would rather talk. Applications are not an offer of finance, and all lending is subject to lender criteria.

  1. 01

    List what you owe

    Note each debt, its balance and your current repayment. Payout figures help us get the amount right.

  2. 02

    Apply online

    Tell us about your debts, work and income in the online application. Prefer to talk? Call us and we can take it over the phone.

  3. 03

    Initial decision

    We aim to give you an initial decision quickly, often within an hour during business hours, with any conditions and what the lender needs to verify, such as proof of income.

  4. 04

    Funding and one repayment

    Once approved, funding usually follows within 24 to 48 hours. Your existing debts are usually paid out directly as part of settlement, depending on the lender, and we confirm how before you sign.

Side by side

Consolidation loan, mortgage top-up or balance transfer?

Three common ways to combine debt in New Zealand, and how they differ. Features vary by lender and product.

Debt consolidation loanMortgage top-upBalance transfer
What it isA personal loan that pays off several debtsExtra borrowing added to your home loanCard balances moved onto a new credit card, often with a promotional period
SecurityUnsecured, or secured over a vehicle, depending on the lenderSecured against your homeUnsecured
When it endsA set term agreed up frontSpread over the remaining mortgage term unless you repay it fasterNo set end date; any balance left after the promotional period moves to the card’s standard rate
What to weighFees and the total interest over the termMore interest in total over a longer term, and the debt is tied to your homeTransfer fees, and the new card adds credit you could spend
Who arranges itA lender directly, or a broker such as FMEYour mortgage lender or a mortgage adviserA credit card provider

General information only, not financial advice. Rates, fees and terms vary by lender and product, and are confirmed in your loan documents.

Related

More on personal loans

Other ways people use a personal loan.

Questions

Debt consolidation loans, answered.

Quick answers. Longer chats are welcome on the phone.

There is no single best bank or lender for debt consolidation. Each lender sets its own criteria, rates and fees. As a broker, we look at your situation, put your application to a lender whose criteria fit, and explain the terms in plain English before you commit.

It depends on the lender’s criteria and, for a car loan, whether it is secured over the vehicle. Tell us about every debt in your application and we will confirm which ones can be included before anything is signed.

We aim to give you an initial decision quickly, often within an hour of applying during business hours. Once approved, funding usually follows within 24 to 48 hours. Your existing debts are usually paid out directly as part of settlement, depending on the lender, and we confirm how with you before you sign.

The balance is paid off, but the card stays open unless you close it. A lender may make closing a paid-off card, or reducing its limit, a condition of the loan. Either way, new spending on a cleared card adds to what you owe.

Sorry, no. We do not arrange loans for applicants whose main income is a benefit, or who are not currently working. If debt is becoming hard to manage, MoneyTalks offers free support on 0800 345 123.

Applications are not an offer of finance. All lending is subject to lender criteria, affordability, verification and responsible lending checks. Calculator results are estimates only. This page is general information, not financial advice.

Finance Made Easy is a trading name of TrueNorth Financial Services Limited, FSP1011270, and a member of Financial Services Complaints Ltd (FSCL), membership 9517.

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Answer a few quick questions and we aim to call you within 15 minutes during business hours. It is an enquiry with no obligation, and it is not an offer of finance. Ready to go? Apply online now.

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Prefer to talk? 0800 995 014 info@fmefinance.co.nz

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