Loan Money – How to Pay Loans Without Stress (2026)

Managing multiple loans can feel overwhelming, especially when juggling various interest rates and repayment schedules. You might be wondering if you can use one loan to pay off another. This common query is rooted in a desire for financial simplicity and efficiency. However, navigating this strategy requires a clear understanding of the rules, potential benefits, and risks involved. Let's dive into how you can manage this effectively in the current Australian financial landscape.

Understanding Using Loan Money to Pay Off Another Loan

Using one loan to pay off another, commonly known as debt consolidation, involves taking out a new loan to pay off existing debts. This can be a strategic move to reduce the number of payments you manage each month, potentially lower your interest rate, and simplify your financial life. In Australia, this is a popular method for those dealing with multiple credit card debts, personal loans, or high-interest payday loans.

Current Rates, Requirements, and Options for Debt Consolidation

The Australian loan market in 2026 offers a variety of debt consolidation options. Interest rates are a crucial factor in determining if debt consolidation is right for you. As of 2026, personal loan interest rates for debt consolidation typically range from 6.49% to 12%, depending on the lender, your credit score, and financial history.

Eligibility criteria generally require a stable income, a good credit score, and a sound repayment history. Each lender has specific requirements, and with access to over 83 lenders, Esteb and Co can help you find the best fit for your situation.

Steps to Use a Loan to Pay Off Another Loan

Taking a strategic approach to using a loan to pay off another can save you money and stress. Here’s how to do it:

1. Assess Your Debts: List all your current debts, including the interest rates and repayment terms.
2. Check Your Credit Score: A good credit score can help you secure a lower interest rate on your new loan.
3. Calculate Potential Savings: Determine if consolidating your debts will save you money by comparing the interest rates and fees of your current loans against potential new loan offers.
4. Research Lenders: Use a comprehensive panel like Esteb and Co’s network to compare offers from different lenders.
5. Apply for the Loan: Once you find a suitable loan, submit your application. Ensure all your documentation is accurate and complete.
6. Use the Funds Wisely: Upon approval, use the new loan funds to pay off your existing debts immediately to reduce the risk of accruing additional interest.
7. Follow a New Budget: Plan your finances to accommodate the new loan repayment schedule, ensuring you stay on track.

Tips and Considerations from Experts

Before deciding to consolidate your loans, consider these expert tips:

• Evaluate Fees: Be aware of any loan origination fees or penalties for early repayment on your existing loans.
• Read the Fine Print: Carefully review loan terms and conditions to avoid unexpected charges.
• Consider Loan Types: A balance transfer credit card could be beneficial for smaller debts, while a personal loan might be better for larger amounts.
• Long-Term Impact: Ensure the new loan improves your financial situation in the long run and doesn’t just offer short-term relief.
• Seek Professional Advice: Consulting with a financial advisor or mortgage broker can provide personalised guidance tailored to your financial goals.

Frequently Asked Questions

• Can I use a personal loan to pay off my credit card debt?
  Yes, using a personal loan to consolidate credit card debt can be a smart move if the interest rate is lower than your current credit card rates.
• Is debt consolidation the same as refinancing?
  Not exactly. Debt consolidation combines multiple debts into one, whereas refinancing typically involves replacing an existing loan with a new one at better terms.
• Are there risks to debt consolidation?
  Yes, if not managed properly, you could end up with higher debt or longer repayment terms, which could cost more in the long run.
• How does my credit score affect my ability to consolidate debt?
  A higher credit score can help you secure a loan with more favourable terms, such as lower interest rates.
• What if I have bad credit?
  Options might be limited, but some lenders specialise in offering loans to those with less-than-perfect credit. It’s important to compare offers carefully.
• Can I consolidate secured and unsecured loans together?
  Yes, but it typically involves taking out a secured loan, such as a home equity loan, to pay off unsecured debts.
• What happens if I miss a payment on my new consolidated loan?
  Missing payments can negatively impact your credit score and result in penalties. It’s crucial to maintain timely payments.