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Debt Consolidation Loans in NZ: How They Work and What They Cost

Updated

Debt consolidation means taking out one loan to pay off several debts, such as credit cards, store cards, hire purchase and other personal loans, leaving one repayment and one interest rate. It lowers the total cost only when the new rate is lower and the debt isn’t stretched over a much longer term.

When consolidation lowers the cost

Consolidation reduces the interest paid when (1) the new loan's rate, including fees, is lower than the average rate on the debts it replaces; (2) the new term isn't much longer than the time the old debts would have taken to clear; and (3) the cleared credit cards don't fill up again. If the cards are run up again, there are two sets of debt instead of one.

How Debt Consolidation Works

  1. You apply for a personal loan large enough to cover the debts you want to combine
  2. On approval, the funds pay off the existing debts (some lenders pay the other creditors directly)
  3. You make one repayment to the new lender instead of several
  4. If the new rate is lower and the term no longer, you pay less interest overall

Worked Example

Three debts, $15,000 in total:

  • Credit card: $5,000 at 20.95% p.a., repaid at $130 a month
  • Store card: $2,000 at 24.95% p.a., repaid at $55 a month
  • Car loan: $8,000 at 14% p.a., repaid at $280 a month

Total repayments: $465 a month.

Left as they are, at those repayments the car loan clears in about 3 years, but the credit card takes about 5.4 years and the store card about 5.75 years. Total interest: about $6,920.

Consolidated into one $15,000 personal loan at 12% p.a. over 3 years: about $498 a month, and about $2,940 of interest. Everything is cleared in 3 years.

Difference: about $3,980 less interest and the debts cleared nearly 3 years sooner, for about $33 a month more in repayments. Any establishment fee reduces the saving. (Interest calculated monthly; figures rounded.)

The saving comes from the lower rate on the card balances and the shorter time to clear them. The same $15,000 consolidated over 7 years at 12% would have lower repayments but more total interest.

When Consolidation Doesn’t Lower the Cost

1. The new rate isn’t lower. If your credit history means the only offers are at or above your current rates, consolidating adds fees without reducing interest.

2. The term is much longer. Moving debt from a 2-year to a 7-year term lowers repayments but can increase total interest even at a lower rate.

3. The cards fill up again. Once the cards are cleared, their limits are available again. If new spending goes onto them, there is the consolidation loan and new card debt. Closing the cleared cards or lowering their limits removes that risk; see how to avoid credit card debt.

4. Unsecured debt moved into a mortgage. Adding consumer debt to a home loan gives it a lower rate, but secures it against your home and can spread it over 20 years or more, which may cost more in total interest. That route is covered in using your mortgage to consolidate debt.

Lenders Offering Debt Consolidation Loans

Providers are listed alphabetically. Rates checked on the lenders’ pages 14 October 2026.

  • ANZ: a single rate of 13.90% p.a. on all its personal loans, $3,000 to $50,000
  • BNZ: 12.90% p.a. on its Advanced Personal Loan, $1,000 to $60,000; existing BNZ personal loans can be combined with new lending up to $60,000
  • Finance Now (part of Heartland Bank): 8.25% to 29.95% p.a., up to $60,000
  • Harmoney: 7.99% to 24.99% p.a. depending on the credit assessment, $2,000 to $100,000; its loans can be used for debt consolidation
  • Kiwibank, ASB and Westpac also offer personal loans that can be used for consolidation; their sites give a quote

Fees, terms and other lenders are in personal loans compared.

Good Shepherd No-Interest Loans

Good Shepherd NZ offers no-interest, fee-free “Good Loans” to people on limited incomes, for essentials such as buying or repairing a car, essential items and services, and consolidating high-interest debt. It says loans can be “up to $15,000 for debt consolidation”, and it lists household income limits (for example, under $65,000 a year for a single person, as of 1 October 2024).

As of 14 October 2026, Good Shepherd’s page says: “We have temporarily paused taking new enquiries for loans that consolidate debt.” It suggests contacting MoneyTalks for a free financial mentor in the meantime.

The Consolidation Process

  1. List all debts: balance, interest rate, repayment and time left
  2. Work out the current total interest if the debts are left as they are (each lender can tell you the payoff figures)
  3. Get consolidation quotes from two or three lenders
  4. Work out the new total cost: the total amount repayable on the new loan, including fees
  5. Compare the totals and the time to be debt-free, not just the monthly repayment
  6. Use the funds to close the existing debts straight away
  7. Close the cleared cards or reduce their limits, so they can’t fill up again

Free Debt Help in NZ

If a consolidation loan isn’t available or wouldn’t lower the cost, free help is available:

  • MoneyTalks: 0800 345 123, moneytalks.co.nz: free financial mentoring, and referrals to services such as Good Shepherd
  • CAP NZ (Christians Against Poverty): capnz.org: free debt counselling
  • Citizens Advice Bureau: cab.org.nz: free information and referrals
  • Insolvency and Trustee Service: insolvency.govt.nz: information on insolvency options

Where to check the latest data

Rates, fees and returns change often. Before deciding, check current figures yourself: