Small debt consolidation loans

When you can foresee a financial bump in the road ahead, a small debt consolidation loan could have you covered. It’s a short-term finance solution to keep in control, streamline your financial responsibilities and protect your credit score. 

Banks, credit unions and online lenders may offer small debt consolidation loans from $300 to $20,000 to cover a whole range of debts - your credit card spending, extended travel plans, an upcoming medical procedure or even just forward planning for tuition payments. That’s the beauty of this kind of loan, you can cleverly reduce the cost of borrowing if you identify finance that provides a better deal. 

Where do I get one?

There are many places to apply for a small debt consolidation loan, though do bear in mind it is best not to make multiple applications as this can negatively impact your credit score.

Do your research on banks, credit unions and online loan companies who will each set their own eligibility requirements and interest rates based on your credit history and income. 

Choose a small debt consolidation loan provider with a solid reputation for customer service and good customer service rating and reviews. Make sure they are registered on one of ASIC Connect's Professional Registers. If they're not listed on one of these three lists, they're operating illegally. 

Is a small debt consolidation loan for me? 

Think of a small debt consolidation loan as a micro loan with shorter payback periods. You borrow less and pay it back in a shorter time frame, anything from 3 months to 2 years dependent on the provider. 

They’re more manageable than a pay-day loan that offers immediate money at a high interest rate on the proviso the loan is repaid with your next wage payment. Think of a pay-day loan as an advance on your wages, with interest.

Credit cards only offer a limit you can spend up to, whereas small debt consolidation loans give you a lump sum up front at a lower interest rate than a credit card. 

Remember, if you choose a fixed interest rate for any loan then you know what your payments are up front, if you choose a variable then you’ll need to stay on top of your budget as rates change.

How can I spend the money?

Take your pick, a small debt consolidation loan is a solution to smooth over life’s peaks and troughs. While you should use the loan to streamline your existing debts, it’s a good opportunity to take a look at the bigger picture. What other bills or outgoings are coming up, that might be worth rolling into this new loan, so you can get ahead, and stay that way? Are you sure you have enough of a buffer to allow for your next car service and registration payment? You may have been putting off a dental procedure, is it time to take control and go ahead with the work now, and manage the costs over the next little while? 

A small debt consolidation loan in Australia is considered an easy solution, you can usually apply online with no paperwork and you’ll know all your fees upfront so deciding how much you can loan is easy.

What is the smallest amount I can borrow?

Some lenders will go as low as $300 but most small debt consolidation loans in Australia will start around the $2000 mark and go up to $20,000.

For amounts lower than $2000 it’s probably worth weighing up your other finance options. Can you speak to your credit card providers about a lower monthly payment, or can you negotiate a pause in your repayments on another loan while you get ahead? 

Will it impact my credit rating?

Credit scores can be delicate things. It’s important to keep your credit rating healthy. A small debt consolidation loan may be a short-term solution to a life issue, but in the longer run it’s better to have a larger loan that’s paid back consistently.

How you apply for your debt consolidation loan can also impact your credit score. Avoid the temptation to apply with multiple lenders as this can impact your score, better to do your research and apply for the one that works for you. 

Requesting a RateEstimate with Plenti won’t impact your score as it is considered a soft credit check in order to offer a rate specific to you. If you then apply for a loan, we submit a credit enquiry from Equifax and/or Illion and that enquiry may affect your credit score. 

Either way, ensuring you meet your regular payments, even topping up payments, will help keep your credit score viable when you want to borrow more. 

Research the banks, credit unions and online loan providers that you consider. Why? Because high interest payday loans are considered by credit agencies as more risk. A small debt consolidation loan, however, is considered less of a risk.

Why a small debt consolidation loan over a regular loan?

A small debt consolidation loan is usually easier to obtain than a standard personal loan – however that all depends on your credit score. 

For smaller amounts, loan approval may well be quicker, though interest rates and fees may be higher for a small debt consolidation loan depending on your loan provider. 

Fees and charges

Before applying to a lender, always compare provider fees, admin charges and interest rates. A good comparison site will break these down for you. Try our Plenti comparison guide or Canstar also offers comprehensive comparisons. 

The important elements to compare on all debt consolidation loans are comparison rates, interest rates, application fee and loan term. Also enquire about exit fees should you wish to pay out your loan early and default and missed payment fees. The comparison rate will show one figure that encompasses the entire cost of the loan you are researching. 

Plenti’s lending market is live, so it’s good to check our live rates as they can vary depending on our lending markets.

Most providers of small debt consolidation loans charge an upfront high-rate establishment fee plus monthly administration fees. Your repayment figures will also have a set interest rate, though repayment terms can be as short as 3 months if you just need a band aid for your financial challenges until you get back on your feet.

Am I eligible?

Small personal loans in Australia are available for both citizens and permanent residents over the age of 18. But you’ll also need to prove a regular income in your bank account. 

A good credit rating will be rewarded with lower interest rates and faster approvals, however some, but not all, lenders will still offer loans to those with bad credit and also those on Centrelink benefits. 

The paperwork

The good news is that small debt consolidation loans tend to have a fast approval process and can be done online. You’ll need to show bank statements, employment history, credit card statements and outgoings. If you’re self-employed you’ll need the last two years of your business and personal tax returns (so have your accountant on speed dial). 

Identification documents are a given so get your passport, licence and proof of address together.

Plenti is required to verify the identity of all applicants by law, including under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. Most applicants can complete their identity verification online.

Most lenders offer approval within 48 hours, some within 24 hours.

Paying off your small debt consolidation loan

It’s important to ensure you make your small debt consolidation loan repayments on time. This will keep your credit score shiny. If you can make extra payments or even pay out the loan early, with no fees, then do so. 

However if life serves you some curveballs and you find repayments difficult then contact your provider and have a discussion, you may be able to pause or amend your payment schedule without impacting your credit score.