Debt Consolidation Loans: How They Work & When to Use Them

maxsherlock
Apr 18, 2025
2 min read

Updated: Apr 30, 2025

Managing multiple debts can be stressful—especially when they all come with different interest rates, payment dates, and lenders. If you’re juggling credit cards, a car loan, or other personal debts, a debt consolidation loan could offer a smarter and more manageable way forward.

At Sherlock Loans, we help Australians take back control of their finances with tailored debt consolidation solutions. Here’s how it works—and when it might be the right move for you.

💡 What Is a Debt Consolidation Loan?

A debt consolidation loan is a type of personal loan used to combine multiple debts into one simple loan with a single repayment. Instead of keeping track of several loans, you’ll just have one monthly or fortnightly repayment—often at a lower interest rate.

You can use a debt consolidation loan to pay off:

Credit cards
Store cards
Existing car loans or personal loans
Buy now, pay later services
Overdue bills

The goal is to reduce financial stress, save on interest, and simplify your money management.

🔎 How Does It Work?

Here’s a step-by-step look at how the process works:

Assess your debts – List what you owe and to whom, including interest rates and monthly repayments.
Apply for a personal loan – We help you apply for a single personal loan with an amount large enough to pay off all your existing debts.
Pay off your debts – The funds from your new loan are used to clear your old balances.
Make one repayment – You now repay one lender at a consistent rate, with fixed terms and a clear end date.

It’s a simple, effective way to regain clarity and reduce financial pressure.

✅ When Is Debt Consolidation a Good Idea?

A debt consolidation loan may be right for you if:

You're struggling to keep up with multiple repayments
Your current interest rates are high
You want to reduce your monthly outgoings
You prefer a fixed repayment schedule and a clear loan term
You’re looking to improve your credit score by avoiding late payments

That said, consolidation isn’t always the right fit for everyone. It’s important to understand the terms of the new loan and ensure you're not extending the debt longer than necessary. That’s where working with a trusted broker like Sherlock Loans can make a big difference.

🕵️ How Sherlock Loans Can Help

At Sherlock Loans, we’re here to make the complex feel simple. We work with over 40 lenders across Australia to help you compare your options and find a loan that suits your financial goals—not just your credit score.

Whether you're refinancing a car loan, consolidating multiple debts, or applying for your first personal loan, we’ll help you make a smart, informed decision.