How to consolidate debt without stretching it over 30 years

Most lenders will set the consolidated amount up as its own loan account, with its own term and repayment, alongside the home loan. A $60,000 consolidation split over seven years at the home loan rate has a repayment of around $880 a month, which is usually well below what the cards and personal loans were costing, and it is gone in seven years. The home loan portion stays on its own term. This is the cleanest structure and it is what specialists ask for by default.

If the lender will not split, or you prefer one account, take the total of your old card and loan repayments and set it up as an automatic extra repayment on the mortgage. The consolidated portion is cleared in roughly the same time the split would have taken, and the extra goes into redraw if you ever need it. The risk is that the extra repayment is voluntary and stops when money gets tight, which is why the split is preferred.

Direct the old repayment amount into an offset account instead. The interest saving is identical to paying the loan down, and the money is accessible. It suits borrowers who want a buffer, and it is dangerous for borrowers who will spend the buffer. Know which one you are.

Before settling, ask for the total interest over the life of the loan with and without the structure. A consolidation that lowers the monthly repayment by $1,200 but adds $40,000 in lifetime interest is a bad deal unless the extra cash flow is directed back at the debt. A specialist will show both numbers and set up whichever structure you choose at settlement, so the discipline is built in rather than left to you.