How debt consolidation can help borrowers go from chaos to control

At the same time, plenty of small and medium-sized enterprises (SMEs) are feeling the heat, with outgoing obligations hindering cash flows and their ability to invest.

Against this backdrop, debt consolidation is one lever borrowers can lean on to simplify finances and, in some cases, reduce repayments by securing a favourable rate.

Last year, figures from the Australian Securities and Investments Commission (ASIC) showed almost half (47 per cent) of Australians with a current debt – the equivalent of 5.8 million people – said that they had struggled to make repayments.

While two rate cuts from the RBA – and hopes of more to come – will have brought some relief, cost-of-living pressures are still hitting borrowers hard.

Speaking to The Adviser, Barry Saoud, general manager, mortgages and commercial at Pepper Money, said the non-bank lender is seeing strong demand from borrowers looking to consolidate debt, particularly from self-employed clients.

“With the cost of living staying high, interest rates moving around, and unsecured debts piling up, it allows clients to consolidate an unlimited number of debts to single, more manageable monthly repayment. It’s no surprise people are looking for ways to simplify things,” Saoud says.

“The Reserve Bank has pointed out that while most people are keeping up with repayments, many are feeling the pressure.”

He cited recent analysis of Reserve Bank of Australia (RBA) data from comparison site Canstar, which showed Australians spent $28 billion on credit cards in December 2024, with $17.9 billion of this debt racking up interest charges.

“That kind of credit reliance shows just how stretched some households are – and why rolling debts into one manageable loan is becoming a go-to move,” he says.

“That’s why more clients are looking to roll their credit card, personal loan, or even ATO debts into something more manageable – and ideally, more cost-effective.”

How brokers are helping

In a recent appearance on The Adviser’s New Broker podcast, Andrew Wallace, a broker at Sydney-based firm Crowd Property Capital, explained how he’d helped a client struggling with his repayments consolidate his debt.

“He had a home loan, he had all this credit card debt, all these personal debts, plus he owed about $20,000 to the family as well (because he’d tried to start his own business and it just backfired). He fell behind. He had a lot of mortgage stress,” Wallace says.

But Wallace was able to consolidate all of the debt into easier-to-manage repayments, saving the client $500 each month.

“They’re in a position right now where they actually called me not too long ago and they want to buy another property,” Wallace said.

“It was really rewarding to see that happen.”

Business case

But it’s not just consumers who are turning to debt consolidation to manage their debt load, businesses are too, particularly those saddled with ATO debt.

“With the ATO stepping up collections and new rules kicking in from 1 July 2025 (which will scrap the deductibility of general interest charges), many SMEs are acting now to get ahead. Demand isn’t slowing down,” Saoud says.

David Smith, chief distribution officer at non-bank lender Liberty, echoed this sentiment and said the start of a new financial year is the perfect time for brokers to get on the front foot and see how they can help business clients juggling high-interest debts.

“As we head into a new financial year, it’s a good time for business owners to speak with their broker about their options, including the potential to consolidate ATO debt,” Smith said.

Both Saoud and Smith said that brokers are well-placed to help business clients find the right lender to consolidate ATO debt, as not all lenders will do so.

Smith said: “While Liberty offers this option, not all lenders do, so it’s important customers can work with their broker to explore what’s available.

“Business owners may not realise they could consolidate tax debt into an existing home or commercial loan. That’s a conversation worth having.

“Brokers can add real value by educating borrowers on their options and connecting them with flexible lenders who can help.”

Saoud added: “As traditional banks tighten their criteria, brokers are turning to non-banks like Pepper Money to help clients who don’t quite fit the mainstream mould but still need smart, flexible lending options.”

Smith also said that debt consolidation gives brokers an opportunity to help their clients plan ahead and make more confident decisions.

“Ultimately, a debt consolidation loan isn’t just a product – it’s a strategy. It opens the door to broader conversations that can help brokers deepen client relationships,” he said.

Keep it simple

Part of making a debt consolidation loan work is ensuring clients know exactly what they’re getting themselves into, according to Angelique Tallon, director and broker at Mornington Peninsula-based brokerage Zimlend Finance Brokers.

“I think what a lot of people don’t realise – and probably fail to explain – is that you are often adding debt onto a much longer term,” Tallon says.

“We’re putting it onto a [30-year] home loan, rather than a car loan or whatever it might be, which might be five years or seven years.

“It’s really important to explain that in a lot of cases, it is getting added onto the longer loan term. Because, really the interest over that loan term could actually be more than what they would have paid had they kept it on the short-term arrangement that it’s in.”

Brokers also need to make sure their clients aren’t just using debt consolidation to kick the can down the road, according to Daniel Berti, director at Sydney-based brokerage Berti Financial.

However, reducing repayments now may help borrowers get into a strong financial position in the long run.

“It is important to provide clients with a service that manages their finances holistically. Offering the solution and education around debt consolidation can genuinely improve a client’s financial well-being, reduce stress, and improve cash flow,” Berti said.

“This can enable clients to pay off the total debt sooner, and/or increase borrowing capacity for investment opportunities now and in the future.”

Big picture

Debt consolidation can give borrowers the chance to turn down the heat on their repayments and transform their finances and feel as if they’ve left the chaos of a kitchen in a crowded cafe to the control of a kitchen in a Michelin-starred restaurant.

But to make that transformation work, brokers need to step back and look at the full financial picture.

“Consolidation isn’t one-size-fits-all and it requires a strategic approach based on a clear view of their position,” Smith said.

“It’s not just about rolling debts into one loan – it’s about helping clients improve their long-term financial health. That means understanding how they earn, what their goals are, and finding flexible solutions that actually work for them,” Saoud said.

“With the right support, brokers can make a real difference in helping clients reduce stress, build resilience, and take back control.”

This piece originally appeared in The Adviser’s July magazine. Subscribers can read the digital version here. Become a member of The Adviser and access exclusive benefits here.

[Related: Brokers crucial as SMEs face tough decisions: NAB]