Consolidate debts into one loan

Can I consolidate my debts into one loan?

Yes. A debt consolidation loan combines multiple existing debts - credit cards, personal loans, buy-now-pay-later balances - into a single loan with one regular repayment. It simplifies your finances and can reduce the total interest you pay, but it is not the right move for everyone.

What is a debt consolidation loan?

A debt consolidation loan is a personal loan used to pay off several debts at once. Instead of managing multiple repayments at different interest rates and due dates, you make one fixed repayment to one lender. The goal is to reduce complexity and, where possible, lower your overall cost of borrowing.

It is worth being clear about what consolidation does not do: it does not erase debt. The total amount you owe stays the same - what changes is how that debt is structured and, ideally, how much interest accumulates over time.

Debt consolidation loan explanation

Think of it this way. You might have a credit card charging 20% per annum, a store card at 25%, and a personal loan at 18%. Each has its own repayment date, minimum payment, and fee structure. A consolidation loan replaces all three with a single loan at a single rate. If that rate is lower than the average across your existing debts, you save money on interest. If the term is shorter, you pay less overall. If neither of those things is true, consolidation may not help you financially - even if it feels more manageable.

Nomu Finance consolidates eligible debts into a single loan with one regular repayment, with loan terms ranging from 12 to 84 months. That flexibility means you can choose a term that balances a manageable repayment amount against the total interest you will pay over the life of the loan.

How debt consolidation works

Step 1: Take stock of what you owe

List every debt you carry: the balance, the interest rate, the minimum monthly repayment, and any early-repayment fees. This gives you a clear picture of what you are consolidating and what the new loan needs to beat.

Step 2: Apply for a consolidation loan

You apply for a loan large enough to cover your existing debts. The lender assesses your application based on your income, employment stability, current debt levels, repayment history, and overall credit profile - not just a single credit score. Nomu Finance, for instance, does not apply a single credit score threshold; every application is assessed individually, looking at the full picture including the nature and age of any defaults, recent repayment conduct, and affordability.

Step 3: Pay out your existing debts

Once approved, the funds are used to pay off your existing debts. Some lenders pay creditors directly; others deposit funds into your account and you make the payments yourself. Either way, those accounts are closed or reduced to zero.

Step 4: Make one repayment

From that point, you make a single regular repayment to your new lender until the loan is paid off. The term, rate, and repayment amount are fixed at the outset, so there are no surprises.

Debt consolidation benefits

When consolidation works well, the benefits are real and meaningful.

• Simpler debt management. One due date, one repayment, one lender. That alone reduces the cognitive load of managing multiple accounts and lowers the risk of missed payments.
• Potentially lower interest rates. If your consolidation loan carries a lower rate than your existing debts, you pay less interest over time. This is most obvious when replacing high-rate credit card debt.
• Fixed repayments. Unlike credit cards, which have variable minimum payments, a personal loan has a fixed repayment schedule. You know exactly what you owe each fortnight or month.
• A defined end date. Credit card debt can drag on indefinitely if you only make minimum payments. A consolidation loan has a set term - your debt has a finish line.
• Potential credit profile improvement. Paying off revolving credit accounts reduces your credit utilisation, which can improve your credit profile over time - provided you do not run those accounts back up.

Interest rates: what to expect

Interest rates on debt consolidation loans vary depending on the lender, your credit profile, and the loan amount. Nomu Finance's lender panel offers fixed interest rates for debt consolidation loans up to 29.95% p.a. At the lower end of the market, rates are competitive with or below typical credit card rates. At the higher end, the rate may exceed what you are currently paying - which is why comparing the full cost of the loan against your current debts matters before you commit.

Fixed rates have a practical advantage here: your repayment does not change if market rates move. That predictability makes budgeting straightforward.

Drawbacks and things to consider carefully

Consolidation is a tool, not a solution. Used without care, it can make your financial situation worse, not better.

A longer term can mean more interest overall

Spreading debt over a longer term lowers your monthly repayment but increases the total interest you pay. A loan at 15% over seven years costs more in total interest than the same loan at 15% over three years, even though the monthly repayment feels easier. Run the numbers before choosing the longest term available.

You may not qualify for the rate you expect

The rate you are offered depends on your credit profile. An applicant with a low credit score may be eligible with some lenders, while another applicant with a higher score may not qualify due to other aspects of their profile - such as high existing debt levels or recent credit enquiry activity. Eligibility is not a simple formula.

Secured vs. unsecured loans

Some consolidation loans are secured against an asset such as a vehicle. A secured loan typically attracts a lower interest rate, but your asset is at risk if you miss repayments. Understand what you are agreeing to before signing.

The underlying behaviour has to change

Consolidating debt and then continuing to use credit cards or taking on new debt puts you in a worse position than before - you now have the consolidation loan plus new balances. The loan restructures your debt; it does not address the habits that created it. If spending patterns are the issue, a financial counsellor may be more useful than a new loan.

Early repayment fees

Some lenders charge fees for paying a loan off early. If you plan to make extra repayments or pay the loan out ahead of schedule, check the fee structure before you apply.

How Nomu Finance approaches eligibility

One common concern is whether a less-than-perfect credit history rules out consolidation. Nomu Finance assesses applicant eligibility based on overall credit profile rather than credit score alone. The assessment considers factors such as the nature, value and age of any defaults or arrears, recent repayment conduct, current debt levels, credit enquiry activity, affordability, income, and employment stability. There is no single score threshold that automatically disqualifies an application.

That said, eligibility is not guaranteed. The lender panel includes multiple lenders with different criteria, so an application that does not suit one lender may suit another.

How does Nomu Finance compare to other lenders?

Not all lenders cover debt consolidation as a distinct lending purpose. Driva, for example, does not include debt consolidation in its verified offerings. Lending Crowd offers loan terms of three and five years, while Instant Finance provides terms up to seven years. Nomu Finance's lender panel offers terms from 12 to 84 months, giving borrowers more flexibility to match the repayment term to their situation.

Making the decision: a practical framework

Before applying, work through these questions honestly:

1. Will the new rate be lower than my current average rate? If not, the financial case for consolidation is weak.
2. Can I afford the repayments comfortably? A repayment you can only just manage leaves no buffer for unexpected costs.
3. Am I choosing the right term? A shorter term costs less overall; a longer term is more manageable month to month. Know which trade-off you are making.
4. Will I avoid re-accumulating debt? If the credit cards get used again after they are paid off, consolidation will not help.
5. Have I checked for fees? Establishment fees, early repayment fees, and ongoing account fees all affect the true cost of the loan.

If the answers point toward consolidation making sense, the next step is to compare lenders and get a clear loan offer before committing. Nomu Finance can match your application across its lender panel to find an option that fits your situation.

Next steps

Debt management does not have to mean juggling five different repayments and hoping nothing slips through. If you want to consolidate debts into one loan and get a clearer picture of your options, start by assessing your current debts, then apply through Nomu Finance to see what is available to you. The process is straightforward, and the assessment looks at your full picture - not just a number.

If you are unsure whether consolidation is the right move, a free financial counsellor (available through the MoneyTalks helpline in New Zealand) can help you weigh your options without any obligation.