Consolidate Debt? Here's How to Gain Control Fast

Are you feeling overwhelmed by multiple debts? Juggling credit card balances, personal loans, and other financial commitments can be stressful. You've heard about debt consolidation, but you're wondering, "Can I consolidate my debt with a home loan?" In 2026, with interest rates fluctuating and living costs rising, leveraging your home loan for debt consolidation might just be the solution you need. Let's explore how this can work for you.

Understanding Debt Consolidation with a Home Loan

Debt consolidation involves combining several debts into one single loan, ideally with a lower interest rate, to simplify payments and potentially save money. When you consolidate debt with a home loan, you're essentially refinancing your mortgage to include your other debts.

This approach can offer several benefits:

• Lower Interest Rates: Home loans generally have lower interest rates compared to credit cards and personal loans.
• Simplified Payments: Instead of juggling multiple payment deadlines, you'll have just one monthly repayment.
• Potential Savings: Lower interest rates can reduce the total interest paid over time, saving you money.

Current Market Information and Options

As of 2026, the Australian mortgage market is seeing average variable home loan rates between 5.25% and 7.50%. With credit card interest rates often exceeding 15%, consolidating debt into a home loan can be financially advantageous.

Before proceeding, consider the following requirements and options:

• Equity in Your Home: Lenders typically require you to have sufficient equity in your home to cover the additional debt.
• Credit Score: A good credit score can improve your chances of securing favourable terms.
• Loan-to-Value Ratio (LVR): Generally, lenders prefer an LVR of 80% or less after consolidation.

Here's a comparison of potential scenarios:

How to Consolidate Debt with a Home Loan

Here's a step-by-step guide to consolidating your debt with a home loan:

1. Evaluate Your Debts: List all your debts, including balances, interest rates, and monthly payments.
2. Assess Your Home Equity: Determine how much equity you have in your home. This will influence your borrowing capacity.
3. Check Your Credit Score: Obtain your credit report to understand your creditworthiness.
4. Consult with a Mortgage Broker: A broker, like those at Esteb and Co, can help you understand your options across 83+ lenders.
5. Apply for Refinancing: Choose a lender and apply for a refinanced home loan that includes your consolidated debt.
6. Close Existing Debts: Once approved, use the funds to pay off your existing debts.
7. Adjust Your Budget: Incorporate the new repayment plan into your budget to ensure timely payments.

Tips and Considerations

Before proceeding with debt consolidation through a home loan, consider these expert tips:

• Long-term Cost: While monthly payments may decrease, extending the loan term could increase total interest paid over time.
• Discipline is Key: Avoid incurring new debts once your existing debts are consolidated.
• Emergency Fund: Maintain an emergency fund to prevent the need for high-interest debt in the future.
• Professional Advice: Seek advice from financial advisors or mortgage brokers to tailor a solution to your specific needs.

Frequently Asked Questions

• Can I consolidate any type of debt into my home loan?
  Generally, unsecured debts like credit cards and personal loans can be consolidated. Check with your lender for specific eligibility.
• How does consolidating debt affect my credit score?
  Initially, there may be a slight dip in your credit score due to the credit inquiry, but in the long run, it can improve if you manage repayments well.
• Is it always cheaper to consolidate debt with a home loan?
  Not always. Factor in all costs, including potential fees and the total interest over the loan term.
• What happens if I can't make the consolidated loan payments?
  Failure to repay could risk your home, as it's used as collateral. It's crucial to ensure the repayments are manageable.
• Can Esteb and Co help with debt consolidation?
  Yes, our brokers can provide tailored advice and access to a wide range of loan products from over 83 lenders.
• How long does the consolidation process take?
  It varies, but the process can take a few weeks from application to settlement.
• Are there any tax implications?
  Consult a tax professional, as tax implications can vary based on your personal financial situation.