Australians are making a clear trade off by using personal loans to replace open ended credit card debt with a fixed repayment schedule. The driver is straightforward. Credit card balances that attract interest remain large, and when the rate you pay is typically well above 18%, even a modest balance can become hard to shift.
The Reserve Bank of Australia retail payments snapshot for November 2025 shows $44.6b in total balances outstanding on credit and charge cards, with $22.2b of that accruing interest. That is the segment where interest charges keep running until the balance is cleared, which is why more borrowers are looking at personal loans for debt consolidation.
Credit Cards: The Balance Is Not the Only Story, the Interest Is
The most important line in the RBA snapshot is not spending, it is the interest accruing balance. In November 2025, the RBA reports $22.2b in balances accruing interest.
That is why “just make the minimum” is such a damaging habit. Canstar cites an average rate of 18.61% and illustrates how long minimum style repayments can keep a balance alive. You do not need to accept every part of a media calculation to take the point: with high rates, time becomes expensive.
A key caveat: the RBA also flags that growth rates in November 2025 were affected by a significant reporting change by one institution. So treat month to month and year ended movements cautiously, but do not ignore the level.
Why Personal Loans Are Being Pulled Into the Consolidation Role
Personal loans are not new. What is changing is how often they are used as a clean up tool rather than a one off purchase tool.
ABS lending indicators show the value of new personal fixed term loan commitments at $9.3b in the September quarter 2025, up 2.8% from the June quarter and up 12.7% year on year. This is not a direct “debt consolidation only” measure, but it is a strong signal that fixed term personal credit is active and growing.
In a high cost environment, the consolidation logic is simple:
- Credit card interest compounds fast when balances stay revolving
- A fixed term loan has an end date and a scheduled pathway to zero
- One repayment can be easier to manage than multiple cards and limits
Consolidation Can Help, but It Can Also Backfire
ASIC’s MoneySmart puts the warning plainly: debt consolidation can make repayments easier to manage, but it may cost more if the interest rate or fees are higher than before, and it can lead to deeper debt if you free up card limits and spend again.
This is where many borrowers misread the moment. They focus on the monthly repayment, not the total cost and the new incentives created by “available credit” reappearing on the card.
3 Questions That Decide Whether Consolidation Is Rational1. Are you lowering the true cost of debt?
Compare rate plus fees, not just rate. MoneySmart recommends comparing the interest rate and fees and other costs against current loans, and being cautious about extending the term because you can pay more overall even if the rate is lower.
- Are you removing the revolving behaviour?
If you keep using the card after paying it out, you have not consolidated, you have multiplied.
- Is repayment realistic under stress?
The goal is a plan that you can keep during a bad month, not a plan that only works when everything goes right.
What This Means for Lenders and Collections
As debt consolidation demand grows, lenders have a stronger incentive to tighten decisioning and repayment controls. Expect more emphasis on:
- Income and expense verification that reflects real spending, not self estimates
- Repayment alignment with pay cycles
- Early hardship engagement to prevent small misses turning into a default pattern
This is also where reputable lenders differentiate. For example, CashPal positions is a direct lender focused on transparent fees and structured repayments for smaller personal loan amounts, which fits the consumer need for clarity when refinancing higher cost revolving debt.
A Practical Checklist Before You Consolidate Credit Card Debt
Use this as a pre application checklist.
- List every debt with balance, rate, fees, and minimum repayment
- Calculate a payoff date if you pay only the minimum, then calculate a payoff date if you add a fixed extra amount each cycle
- Compare consolidation offers on total repayable, not just the weekly or fortnightly repayment
- Factor in any early payout costs and establishment fees
- Plan what you will do with the card after payout: close it, reduce the limit, or lock it away
- If repayments are already being missed, talk to the credit provider first about hardship options before adding a new facility
Final Thoughts
The next phase of this story is not only “more consolidation.” It is better risk control around repayments. When lenders can verify income, match repayments to pay cycles, and flag early warning behaviour, the market shifts away from blunt approvals and toward managed outcomes.
For borrowers, the headline is equally direct: personal loans can be an effective consolidation tool, but only when the total cost is lower, the card behaviour changes, and the repayment plan is built to survive real life.