Consolidate debts into one loan

Can I consolidate my debts into one loan?

Yes. Debt consolidation means taking out a single loan to pay off multiple existing debts, leaving you with one repayment instead of several. It works for credit cards, personal loans, hire purchase agreements, and other unsecured debts.

What is debt consolidation?

A debt consolidation loan combines what you owe across multiple accounts into a single balance with one interest rate and one repayment schedule. Instead of tracking five different due dates and five different lenders, you manage one.

The goal is simpler debt management. Whether that also means a lower interest rate depends on your credit profile, the lenders available to you, and how your existing debts are structured. If you want a fuller picture of the mechanics, how debt consolidation works is covered in detail in our FAQ.

Benefits of debt consolidation

Consolidating your debts can do a few things at once, depending on your situation.

• One repayment. You replace multiple due dates with a single monthly payment. That alone reduces the mental load of managing debt.
• Potentially lower interest. If your current debts carry high rates - credit cards in particular - a consolidation loan at a lower rate means less interest paid over time. Research from TransUnion found that consumers who consolidated credit card debt with a personal loan reduced their card balances by 57% on average.
• Fixed repayment term. Most consolidation loans have a set end date. That gives you a clear timeline for becoming debt-free, which open-ended credit card debt does not.
• Reduced risk of missed payments. Fewer accounts to track means fewer opportunities to miss a due date and incur fees or damage your credit file.

There are trade-offs worth knowing. A longer loan term can mean you pay more interest overall even if the rate is lower. Some lenders charge early repayment fees. And consolidation only works if you stop adding to the debts you've just paid off.

How to consolidate your debts into one loan: step by step

Step 1: List what you owe

Write down every debt you want to consolidate. For each one, note the balance, interest rate, minimum repayment, and any early repayment penalties. This gives you a clear picture of what you're working with and a baseline to compare against any new loan offer.

Step 2: Check your credit profile

Lenders assess your credit history as part of the application process. You can request a free credit report from providers like Centrix or Equifax before you apply. Knowing where you stand helps you target lenders whose criteria match your situation.

Step 3: Work out how much you need to borrow

Add up the balances you want to clear. That total is your target loan amount. Be realistic - borrowing more than you need to consolidate creates new debt rather than resolving existing debt.

Step 4: Compare lenders

Not all lenders offer debt consolidation as a specific loan purpose. Rates, terms, and eligibility criteria vary significantly. See the comparison section below for a breakdown of what to look for.

Step 5: Submit your application

Once you've chosen a lender or broker, you'll submit an application with supporting documents. These typically include proof of income, bank statements, and details of the debts you want to consolidate. Lender assessment and approval timeframes begin after submission and vary depending on the lender, application complexity, and how quickly you provide any additional information requested.

Step 6: Use the funds to pay off your debts

Once approved, the loan funds are used to clear your existing debts. Some lenders pay creditors directly; others deposit funds into your account for you to manage. Confirm this with your lender before accepting an offer.

Eligibility: what lenders look at

Every lender sets its own criteria, but most assess the following:

• Income. Stable, verifiable income - whether PAYE employment, self-employment, or benefit income - is a core requirement. Lenders want to see that you can service the loan.
• Credit history. A clean credit file helps, but it's not the only path. Some lenders work with applicants who have impaired credit.
• Existing debt levels. Lenders look at your total debt relative to your income. A high debt-to-income ratio can limit your options or affect the rate you're offered.
• Residency. Most New Zealand lenders require you to be a NZ citizen or permanent resident.

If your credit history has gaps or blemishes, that doesn't automatically disqualify you. Nomu Finance assesses every debt consolidation application individually, based on the applicant's circumstances, and helps applicants with both good and impaired credit find options. For more on this, see our guide to debt consolidation with bad credit in NZ.

Choosing the right lender: what to compare

Interest rate

The rate you're offered depends on your credit profile and the lender's assessment. Some lenders publish rate ranges - Lending Crowd, for example, publishes rates from approximately 5.03% to 20.3% depending on the risk grade assigned after credit assessment. Lenny offers personalised rates starting from 8.95%. Instant Finance offers personal loans with annual interest rates ranging from 9.95% to 29.95%, fixed for the loan term. Always compare the rate you're actually offered, not just the advertised minimum.

Loan term and repayment flexibility

Flexibility matters. A lender that allows you to make extra repayments without penalty gives you more control over how quickly you clear the debt. Check whether the loan term can be adjusted and whether early repayment attracts fees. A rigid structure can cost you more in the long run even if the headline rate looks competitive.

Loan purpose coverage

Not every lender covers debt consolidation as a specific loan purpose. Nomu Finance covers debt consolidation as a distinct lending purpose, which means applications are assessed in the context of restructuring existing debt rather than being shoehorned into a generic personal loan category. This distinction matters when lenders are evaluating your application.

Transparency on rates and fees

Before you accept any loan offer, you should know the interest rate, any establishment fees, and the total cost of the loan. Nomu Finance discloses applicable interest rates to borrowers before they accept a loan offer - that's a basic standard worth confirming with any lender you consider.

Broker vs. direct lender

A broker compares multiple lenders on your behalf and can be useful if you're unsure which lender suits your situation. A direct lender assesses your application in-house. Better Finance, for example, partners with lenders including Marac, Heartland Bank, Harmoney, Avanti Finance, Finance Now, and others - giving borrowers access to a panel of options through a single application.

Debt management after consolidation

Consolidating your debts is a tool, not a fix on its own. Good debt management after consolidation means keeping the accounts you've paid off closed (or at least unused), sticking to your new repayment schedule, and not taking on new high-interest debt while the consolidation loan is running.

A budget that accounts for your new single repayment is worth building before you consolidate, not after. If your spending patterns were contributing to the debt in the first place, consolidation buys you breathing room - but the underlying habits need to change alongside it. Our debt consolidation tips for New Zealanders covers practical steps for staying on track after you consolidate.

The CFPB notes that a longer repayment term, fees, or a temporary dip in your credit score are all factors worth weighing before you consolidate. Being informed going in means fewer surprises.

Next steps

If you're ready to consolidate debts into one loan, start by listing your current debts and their rates. Then compare lenders based on the criteria above - rate, flexibility, loan purpose coverage, and transparency. Our debt consolidation loans NZ guide goes deeper on how to evaluate your options.

Nomu Finance can help you find a debt consolidation loan that fits your circumstances, whether your credit history is straightforward or more complex. Talk to the team to get started.