Alternatives to debt consolidation loans: we found a better option for Debbie and Alan
Debbie and Alan, like many Australians, felt overwhelmed by personal debt and even got rejected by the bank for another loan to consolidate, but with MyBudget’s help, they discovered a smarter way to regain financial control, without resorting to another debt consolidation loan.
What is a debt consolidation loan?
A debt consolidation loan is a type of financing that allows you to combine multiple debts (secured or unsecured), such as credit cards, personal loans, car loans, and medical bills, into a single loan with a fixed monthly payment. While this approach can simplify repayments, at MyBudget we believe there are better alternatives to debt consolidation that can reduce financial stress even more. A personal budgeting plan can provide a long-term solution to living your life free from money worries, helping you break free from debt and achieve financial peace of mind.
Australia’s debt situation: in 2025 why are so many people struggling to get out of debt and seek consolidation loans?
Australia’s household debt-to-income ratio currently sits at 188%, meaning the average household owes $1.88 for every dollar earned (ABS, 2024). That’s a staggering amount when you think about it, nearly twice the income people bring in annually is already accounted for in debt repayments, making consolidation of things like credit card debt an attractive option.
This is not just a number on a page; it’s real money, affecting real people. Over the past 20 years, the average mortgage balance has ballooned from $160,000 to $642,121 (Mozo, 2024). That means the average Aussie homebuyer is now taking on over four times more debt than they did in the early 2000s. Understandable to see why consolidating debts together into one payment looks like an attractive option, without considering better alternatives to consolidation.
Pair that with rising interest rates, high loan repayment costs, and soaring living expenses, and it’s no wonder many Australians feel like they’re just treading water financially. When so much of your income is already spoken for, the margin for error, unexpected bills, job loss, or even just a hike in rent, becomes razor-thin.
This is why so many people start looking into a debt consolidation loan. But before you jump in, it’s crucial to weigh up all your options and understand the potential risks, loan terms, and benefits of debt consolidation.
Debbie and Alan’s story: how MyBudget helped them break free from debt without needing a consolidation loan
Debbie and Alan, like many Australians, found themselves in financial uncertainty. Multiple credit cards, personal loans, and mounting weekly repayments were leaving them financially and emotionally drained. They needed an easy solution to manage and get out of their debt.
They thought a debt consolidation loan was the way out, but when the bank shut them down for not meeting the lending criteria, reality hit hard.
“We were scared to answer the phone,” Alan recalls. “We knew it was just another creditor chasing money we didn’t have.”
Desperate, they started looking at Part 9 Debt Agreements, until they realised it could impact their credit score for five years, much like bankruptcy. That’s when they turned to MyBudget, as a way to get out of debt, and everything changed.
4 Alternatives to debt consolidation loans (that aren’t more debt rolled into one)
If you’re struggling with high-interest debt, you might think a debt consolidation loan is your only option. But here’s the truth, not everyone qualifies, and in some cases, it might not even be the best solution. The good news? There are other ways to take control of your current debt that could be a better fit for your individual circumstances rather than consolidation which is just rolling all your debts into another loan.
Here are four realistic alternatives to debt consolidation loans that could help you pay off your debt faster, regain financial stability, and improve your credit rating:
1. MyBudget’s tailored personal budget and debt management plans
One of the best ways to regain control of your finances without needing to consolidate is with a personalised debt management plan, tailored to your income, expenses, and financial goals.
At MyBudget, we don’t just give you a budget; we make sure it works for you in real life. Your budget is customised by our Personal Budgeting Specialists to provide a better option than a debt consolidation loan. We structure your income, prioritise essential expenses, and create a clear, step-by-step plan to reduce debt repayments and build savings as a part of a manageable budget rather than consolidation of debt, so you can start to live free from money worries.
A big part of this? We handle all creditor negotiations for you with regards to your debts. That means no more stressful phone calls or collection notices. We work directly with credit providers to arrange manageable payment plans and, in some cases, even reduce the amount owed. So, instead of worrying about credit card debt, you can focus on moving forward. Doesn’t this sound better than consolidating everything you currently owe?
2. How to negotiate with creditors yourself to reduce your outstanding debts without a consolidation loan
If you prefer to handle negotiations on your own as an alternative to a debt consolidation loan, you can contact your credit providers directly to request assistance. Many lenders are open to working with you if you take the initiative.
According to AFSA, banks and credit card companies are actually required by law to consider your request if you are experiencing financial hardship and want to avoid the debt consolidation path. They might waive late fees, lower the interest rate, or even freeze payments until you get back on your feet.
To make it easier, here are a few simple scripts to get the conversation started:
Ask for a lower interest rate
“Hi! I’m having difficulty keeping up with my outstanding credit card debt. Is there any chance you could lower my interest rate to help me out? It’d really make a difference in getting my finances back on track.”
Payment plan or hardship help
“Hello! I’m currently in a bit of financial stress and struggling to make my debt repayments. Could we set up a more manageable payment plan or discuss any debt relief options you might have?”
Waiving late fees
“Hi there! I’ve hit a bit of a rough patch with all these rate hikes and missed a payment. Any chance you could waive the late fee? I’m working hard to get a bit of extra cash to get my finances back in order.”
These little scripts will help you glide through the debt negotiation conversation like a pro. Remember, the aim is to make some little changes now, that could result in big savings over a period of time, and your credit card provider is obligated to try and help so you can reduce what you owe, and avoid having to consolidate your existing debts.
3. Debt settlement
Some credit providers may be willing to accept a lump sum payment that’s lower than what you owe. If you have access to funds, savings, or a cash-out refinance, this can be a great way to clear unsecured debts for less.
4. Part 9 Debt Agreement
A formal Part 9 Debt Agreement that can stop creditors from chasing you. It can reduce what you owe but comes with long-term consequences like affecting your credit report for five years.
Each option has its pros and cons when considering an alternative to a debt consolidation loan. The key is understanding which alternative debt solution is right for you before making financial decisions.
Real life example: how MyBudget changed Debbie and Alan’s future
The alternative to a debt consolidation loan
After reaching out to MyBudget, Debbie and Alan worked with a personal budgeting specialist to create a tailored debt repayment plan as an alternative to a debt consolidation loan. Instead of a one-size-fits-all debt consolidated loan, they were given a straightforward solution that fit their financial circumstances and long-term goals.
One of the biggest reliefs?
MyBudget took over all creditor negotiations. No more stressful phone calls or letters, Debbie and Alan didn’t have to deal with credit card companies or lenders at all. MyBudget were even able to reduce the total debt owed, giving them a realistic repayment schedule that worked. With a personal budgeting plan, what they owed became lower than it would have been with a debt consolidation loan.
With their new budget, rather than a debt consolidation loan, they were able to:
- cover their essential expenses without falling behind
- set up automatic monthly repayments to avoid late fees
- build better financial habits to set them up for long-term financial success
- start building a savings buffer for financial emergencies.
Now, they’re no longer just surviving, they’re thriving with no need to have used a debt consolidation loan for their debts.
“For the first time in years, we feel in control of our finances,” says Debbie. “We’re not just paying off debt, we’re planning for our financial future.”
Thanks to MyBudget, Debbie and Alan have a clear plan for a debt-free future that ensures they never fall back into the same debt-cycle. They’ve gone from feeling overwhelmed to feeling empowered.
Get out of debt without a consolidation loan: claim your free budget consultation today
Struggling with debt repayments and feeling stuck? The first step to financial freedom is right here. Enquire online today for your free budget consultation and see how MyBudget can help you take control of your finances.
✅ A personalised repayment plan to clear your unsecured debts
✅ We negotiate with credit providers – no more stressful calls
✅ Stop living paycheck to paycheck and start saving money
✅ Get expert support every step of the way.
🔹 Claim your free budget consultation now or call us on 1300 300 922 to take the first step towards a debt-free future.
Still considering debt consolidation? Read Debt Consolidation: is it right for you? to explore whether it’s the right move for your financial situation.