Juggling multiple debts is an all-too-common headache for Australians—from credit cards to personal loans, buy-now-pay-later services, and lingering car finance. If you’re wondering whether to consolidate your debt in 2025, you’re far from alone. With the cost of living still biting and new lending rules in play, debt consolidation is getting a fresh look from both banks and borrowers. Let’s break down what’s changed, what’s possible, and whether it’s the right move for your financial future.
What Is Debt Consolidation and Why Consider It in 2025?
Debt consolidation simply means rolling multiple debts into a single new loan—usually at a lower interest rate or with easier-to-manage repayments. This can be done through a personal loan, a balance transfer credit card, or even by refinancing your mortgage. But why is 2025 different?
- RBA cash rate stability: After a rollercoaster in 2023–24, the Reserve Bank of Australia has signalled a more stable cash rate for 2025, making fixed-rate consolidation loans more predictable.
- APRA lending changes: The Australian Prudential Regulation Authority now requires lenders to more closely assess a borrower’s entire debt profile, making consolidation both more attractive and, in some cases, necessary to secure new credit.
- Cost of living pressures: With inflation moderating but essentials still expensive, more Australians are looking to cut monthly outgoings by streamlining debt.
For example, Sarah from Melbourne had two credit cards and a car loan, each with different payment dates and rates. By consolidating into a single fixed-rate personal loan, she now pays one monthly installment—saving on interest and freeing up cash flow for other essentials.
Types of Debt Consolidation: What’s Available in 2025?
Not all consolidation options are created equal. Here are the main types on offer in Australia this year:
- Personal Loan Consolidation: Banks and lenders are increasingly offering specialised ‘debt consolidation loans’ with fixed rates. In 2025, expect rates from 6.5%–12.9% p.a. for borrowers with good credit, and up to 18% for riskier profiles.
- Balance Transfer Credit Cards: Some cards offer 0% interest on balance transfers for up to 30 months. However, the trend in 2025 is shorter introductory periods (often 12–18 months) and higher revert rates, so read the fine print.
- Mortgage Refinance: If you own property, rolling debts into your home loan can offer the lowest interest rates (as low as 5.9% p.a. with some lenders). But beware: stretching short-term debt over a 20–30 year home loan can mean paying more in interest overall.
- Debt Agreement or Management Plans: For Australians in severe hardship, not-for-profit agencies and legal services are reporting increased demand for formal debt agreements, which can freeze interest and set up a repayment plan. However, these can impact your credit score for years.
With the explosion of buy-now-pay-later services, some digital lenders now offer consolidation products that specifically target these new micro-debts, bundling them into a single installment to reduce mental load and missed payments.
Key Considerations: Is Consolidation the Right Move?
Before jumping in, weigh the pros and cons—especially in the current climate.
- Check total cost: Always calculate the total amount repayable over the life of the new loan, not just the headline interest rate.
- Watch for fees: Early exit fees, application fees, and higher interest after introductory periods can eat away at any savings.
- Discipline matters: Consolidation can free up credit limits. Without a budget and spending plan, it’s easy to rack up new debt.
- Credit impact: Multiple credit applications can temporarily lower your score. But successful consolidation and on-time repayments can help rebuild it over time.
For example, in 2025, major lenders like NAB and Westpac are offering digital tools to show you the real cost of consolidation—including fees and comparison rates—before you commit. Use these tools to model your situation, and consider whether the convenience is worth any potential increase in total interest.
What’s New in 2025? Trends and Policy Updates
The landscape is shifting. Here’s what’s new this year:
- Open banking adoption: Many lenders now use open banking data to get a real-time view of your debts and income, speeding up approval times and offering more personalised rates.
- Stricter affordability checks: APRA’s guidelines mean lenders must stress-test your finances more rigorously, reducing approvals for borrowers at high risk of default.
- Rise of fintech lenders: Digital lenders like Wisr and SocietyOne are offering seamless online applications and faster funding—sometimes within hours.
One notable trend: younger Australians (Gen Z and Millennials) are increasingly using debt consolidation as a proactive strategy, not just a last resort. According to a 2025 Finder survey, 38% of Australians aged 25–34 have considered or taken out a consolidation loan in the past year.
Conclusion: Consolidation Can Be Smart—But Only With a Plan
Debt consolidation in 2025 is more accessible and transparent than ever, thanks to digital tools, policy shifts, and competitive lender offers. But it’s not a silver bullet. Weigh the real costs, check your spending habits, and choose the option that truly fits your goals. Used wisely, consolidation can be a stepping stone to financial freedom—not just a Band-Aid fix.
