Loan Payoff – Escape Debt Fast with Smart Loans (2026)

Have you ever found yourself juggling multiple loan repayments, feeling overwhelmed by the financial burden? You're not alone. Many Australians are exploring the possibility of using one loan to pay off another as a way to streamline their debt and potentially reduce interest costs. But is this a smart financial move?

Understanding Paying Off a Loan with Another Loan

The concept of using one loan to pay off another is often referred to as debt consolidation or refinancing. Essentially, it involves taking out a new loan to settle existing debts. This can simplify your finances by consolidating multiple payments into a single monthly repayment, often with the added benefit of a lower interest rate. However, it's crucial to understand the intricacies before proceeding.

Current Market Options and Rates

In 2026, the Australian loan market offers a variety of options for those considering refinancing or debt consolidation. Interest rates for personal loans, which are commonly used for this purpose, typically range from 6.49% to 12%, depending on the lender and the borrower's credit profile.

When considering refinancing, it's important to compare available options. Esteb and Co, with access to a panel of over 83 lenders, can help you find a loan that meets your needs. Here's a comparison of common features offered by different loan types:

Loan Type	Interest Rate	Typical Loan Term
Personal Loan	6.49% - 12%	1 - 7 years
Home Equity Loan	5.25% - 8%	Up to 30 years
Balance Transfer Credit Card	0% for introductory period	6 - 24 months

Each option has its own requirements and benefits, and it's important to assess your financial situation carefully. Eligibility criteria often include a stable income, a good credit score, and a manageable debt-to-income ratio.

Steps to Pay Off a Loan with Another Loan

Here's a step-by-step guide to help you through the process:

1. Assess Your Situation: Calculate your total outstanding debt and current interest rates. Identify which debts have the highest rates to prioritise them.
2. Check Your Credit Score: A higher credit score can help you secure a loan with a better interest rate. Obtain a free copy of your credit report and address any discrepancies.
3. Research Lenders: Use resources like Esteb and Co to explore lenders that offer competitive rates and favourable terms.
4. Apply for the Loan: Once you've identified a suitable loan, complete the application process. Be prepared to provide documentation such as proof of income and ID.
5. Use the Loan to Pay Off Existing Debts: Once approved, use the loan funds to pay off your higher-interest debts. Ensure you close any accounts you've consolidated to avoid further debt accumulation.
6. Establish a Repayment Plan: Set up a realistic budget that ensures timely repayments of the new loan. Consider setting up automatic payments to avoid missed deadlines.

Tips and Considerations

Before proceeding with using one loan to pay off another, keep these expert tips in mind:

• Consider Fees: Be aware of potential fees associated with loan applications, early repayments, and account closures. These can impact the overall savings you might gain from refinancing.
• Watch Out for Introductory Offers: Introductory low or zero interest rates can be enticing but make sure you understand what the rate will be after the introductory period ends.
• Longer Terms Mean More Interest: While longer loan terms can reduce your monthly repayments, they also mean you'll pay more interest over time. Balance affordability with total cost.
• Maintain Good Financial Habits: Consolidating debt should be part of a broader financial strategy. Avoid accruing new debt and focus on building an emergency fund.
• Consult a Professional: A mortgage broker, like those at Esteb and Co, can provide personalised advice tailored to your financial circumstances and goals.

Frequently Asked Questions

Here are some common questions about using loans to pay off other loans:

1. Is it a good idea to use a loan to pay off another loan? It can be beneficial if the new loan has a lower interest rate and better terms, but it requires careful consideration of fees and long-term financial strategy.
2. What types of loans can be used for debt consolidation? Personal loans, home equity loans, and balance transfer credit cards are commonly used for consolidating debt.
3. How does debt consolidation affect my credit score? Initially, it may cause a small dip due to the credit enquiry, but timely repayments can improve your score over time.
4. What are the risks of consolidating debt? Risks include potentially higher total interest if the term is extended, as well as fees associated with the new loan.
5. Can Esteb and Co help with finding the right loan? Yes, with access to over 83 lenders, Esteb and Co can assist in finding a loan that suits your financial needs.
6. What should I do if my application for a new loan is rejected? Consider improving your credit score, reducing your debt-to-income ratio, and seeking advice from a financial advisor.
7. Are there alternatives to using a loan to pay off another loan? Alternatives include negotiating with creditors for better terms or seeking assistance from a financial counsellor.