Overlapping Debt in Australia: Strategies for Managing Multiple Loans in 2025

With the cost of living rising and access to credit expanding, overlapping debt has become a real concern for many Australians. Juggling multiple debts—like credit cards, personal loans, car finance, and mortgages—can quickly spiral out of control if not managed proactively. As we move into 2025, new financial policies and lender practices are reshaping how Aussies tackle this challenge. Here’s what you need to know to keep your finances in check and avoid the debt trap.

What Is Overlapping Debt and Why Is It Rising?

Overlapping debt happens when a person or household carries multiple forms of debt at the same time. This can include:

• Credit cards with outstanding balances
• Personal loans or payday loans
• Car loans or asset finance
• Home loans or investment property mortgages
• Buy Now, Pay Later (BNPL) obligations

In 2025, the Australian Bureau of Statistics reported that the average household debt-to-income ratio remains above 180%, with much of this driven by overlapping liabilities. The rise of easy online credit, BNPL services, and higher living expenses are all contributing factors. The Reserve Bank of Australia (RBA) has flagged debt layering as a risk to household financial stability, especially as interest rates remain elevated.

2025 Policy Shifts: What’s Changing for Borrowers?

Regulators and lenders have responded to overlapping debt risks with several new measures:

• Comprehensive Credit Reporting (CCR): Lenders now have a fuller picture of your debts, making it harder to hide overlapping obligations when applying for new credit.
• Stricter Serviceability Tests: Banks and non-bank lenders are running more robust checks to ensure borrowers can afford repayments across all debts, not just the new loan.
• BNPL Regulation: The Treasury’s 2025 reforms mean BNPL providers must now run credit checks and comply with responsible lending laws, closing a major loophole that previously allowed debt stacking.
• Interest Rate Pressures: With the RBA’s cash rate holding steady at 4.35%, repayments on variable loans remain high, increasing the risk of default for those with overlapping debts.

For borrowers, this means transparency and proactive debt management are more crucial than ever. Lenders are less likely to approve new finance if you’re already overextended, and missing payments can impact your credit score for years.

Practical Strategies to Manage Overlapping Debt

Feeling overwhelmed? Here are proven strategies Australians are using in 2025 to regain control:

• 1. Consolidate Where Possible: Debt consolidation loans can combine multiple debts into a single payment, often at a lower interest rate. Many lenders now offer ‘green’ consolidation products for those rolling in solar loans or EV finance.
• 2. Prioritise High-Interest Debt: Tackle credit cards and payday loans first, as these carry the highest rates. The Snowball or Avalanche methods can help you create a payment plan that works for your situation.
• 3. Review Your Budget: With inflation still affecting grocery and utility bills, update your budget monthly. Use apps that now integrate with open banking to track debt repayments in real time.
• 4. Negotiate With Lenders: Don’t wait until you’re in trouble—many lenders have hardship teams and may offer repayment holidays or lower rates if you reach out early.
• 5. Limit New Credit: Resist the temptation to ‘top up’ with new BNPL or credit card offers. Each new application can impact your credit score and make managing debts even harder.

Consider this real-world scenario: Sarah, a Sydney teacher, found herself juggling a car loan, two credit cards, and a BNPL account. After failing a bank serviceability check, she used a debt consolidation loan to merge her balances, saving over $250 per month in repayments. She also set up automated payments to avoid late fees and improve her credit profile for future lending.

Warning Signs and When to Act

If you’re experiencing any of the following, it’s time to reassess your debt situation:

• Minimum payments are all you can afford each month
• Using one form of credit to pay off another
• Constantly close to your credit limit
• Missing repayments or receiving default notices

Early action is key. The 2025 policy environment is less forgiving of missed payments, and defaults can remain on your credit file for up to five years.

Looking Ahead: Smarter Borrowing in 2025

As Australia’s lending landscape evolves, so should your approach to debt. Overlapping debt doesn’t have to mean financial stress—if you take charge early, use new tech tools, and stay aware of policy changes, you can turn things around. Remember: in the new era of comprehensive credit and responsible lending, transparency and proactive management are your best allies.